Interest Mortgage Rates

The Obama administration’s Making Home Affordable refinancing plan is having a hard time getting off the ground. The problem seems to be a lack of communication among lenders, mortgage insurance companies, Fannie Mae and Freddie Mac, and the federal government.Case in point: Borrowers with mortgage insurance are being told that they can’t refinance yet under the Making Home Affordable plan. Bank of America (and Countrywide, which BofA just absorbed) says it will refinance home loans under the Obama plan in two phases: first, those without mortgage insurance, and later, those with mortgage insurance. Customers of Wells Fargo say they are told something similar.

A Bank of America spokeswoman says the bank is refinancing loans in two phases because mortgage insurance companies have not implemented the Obama plan yet.

Meanwhile, it’s not clear that employees of Fannie Mae and Freddie Mac are aware that big banks are refinancing loans in phases, depending on whether the loans have mortgage insurance. And some mortgage brokers insist that loans with mortgage insurance will never be refinanced under the Obama plan.

And no one in the federal government seems to want to step up and rectify the confusion.

The benchmark 30-year, fixed-rate mortgage rose 5 basis points to 5.23 percent, according to a national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week’s survey had an average total of 0.47 discount and origination points. One year ago, the mortgage index was 6.11 percent; four weeks ago, it was 5.19 percent.

The benchmark 15-year, fixed-rate mortgage rose 4 basis points to 4.76 percent. The benchmark 5/1 adjustable-rate mortgage fell 1 basis point to 5.11 percent.

The Federal Reserve says its current policy during the financial crisis is to keep mortgage rates low. Fed officials have said this repeatedly — as recently as Monday, in a speech by Vice Chairman Donald Kohn. The effort seems to be working. Bankrate’s benchmark 30-year, fixed rate has been under 5.5 percent since the beginning of February.

Mortgage shoppers got stuck inside an old-fashioned melodrama in the last week.

In the first act, mortgage rates sank as markets digested the federal government’s takeover of Freddie Mac and Fannie Mae. Mortgage shoppers exulted at Uncle Sam’s rescue of Fannie and Freddie. Some dared to hope that rates would fall even lower.

The melodrama’s second act occurred over a tense weekend: The investment bank Lehman Brothers lay tied up on the railroad tracks. Would Uncle Sam ride to the rescue? No! Lehman was gorily dismembered as Uncle Sam stood by, impassively. The mortgage market enjoyed the spectacle, as rates fell even more.

“The bald eagle has said, ‘We’re done bailing anyone out,’” mortgage broker Dan Dowling opined Monday morning. His advice on whether to lock a rate or float: “I think right now, your best ploy is to lock and monitor.”

Act III: Tuesday afternoon, Uncle Sam cackled as he denied the Fed rate cut that the villagers desperately wanted. That night, Wall Street and rating agencies fitted insurance giant AIG with a noose. Just as the trapdoor opened, a bullet sliced through the hangman’s rope, and AIG landed on its feet. Uncle Sam rode up, rifle in hand. “You belong to me now,” he told AIG.

The mortgage market reacted badly to the plot twists of Act III. Fixed-rate mortgages rebounded Wednesday morning and took back the declines of the previous five workdays and then some. And Dowling, president of United Mortgage Capital in Altamonte Springs, Fla., was looking mighty smart for advising clients to lock the day before.

The benchmark 30-year fixed-rate mortgage rose 1 basis point, to 6.16 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week’s survey had an average total of 0.41 discount and origination points. One year ago, the mortgage index was 6.32 percent; four weeks ago, it was 6.66 percent.

The benchmark 15-year fixed-rate mortgage rose 3 basis points, to 5.84 percent, and the 30-year, fixed-rate jumbo, for larger loans, fell 5 basis points, to 7.36 percent. The benchmark 5/1 adjustable-rate mortgage fell 1 basis point, to 6.07 percent.

The Federal Reserve began to slash short-term interest rates almost a year ago. Yet we have higher mortgage rates now than we had then. What gives?

No single answer explains why some rates have fallen while fixed mortgage rates have climbed from an average of 6.43 percent a year ago to 6.6 percent this week. Among the several reasons, you can sum up the main one in two words: credit risk. Lenders behave cautiously now because they lent recklessly in previous years, leading to a surge of foreclosures.

What rates have done
Traditionally, observers noted a link between 10-year Treasury notes and 30-year fixed-rate mortgages: When the 10-year Treasury yield went up, the 30-year mortgage rate went up, and when the Treasury yield fell, so did mortgage rates. That linkage has broken.

Consider two dates, a little over a year apart, when mortgages had the same rates in Bankrate.com’s weekly survey, while the 10-year Treasury yield dropped more than a percentage point:

* On Aug. 8, 2007, the 30-year fixed averaged 6.66 percent, and the 10-year Treasury note yielded 4.85 percent.
* Fifty-four weeks later, on Aug. 20, 2008, the 30-year fixed averaged 6.66 percent again — and the 10-year

Between those dates, the Fed made a drastic series of cuts in the federal funds rate. That rate, also called the overnight rate, stood at 5.25 percent a year ago. From mid-September to late April, the Fed chopped it to 2 percent in a bid to stimulate the economy. It remains 2 percent.

n the world of mortgages, the big news this week was the decline and fall of IndyMac Bank’s home loan operation. The Southern California bank originated almost $77 billion in home loans last year and was a top 10 lender, according to National Mortgage News. With the demise of stated-income loans this year, IndyMac couldn’t reinvent itself fast enough as a conforming and FHA lender.

At the beginning of the week, IndyMac abruptly announced that it would shut down its mortgage lending operation and close its last mortgage Aug. 15. It said it immediately would stop accepting applications. Then the bank did something unusual: It asked for a 1 percent deposit on mortgages that had been approved and for which the rates had been locked. The 1 percent deposit is due today.

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Mortgage rates fell this week as investors grew anxious about corporate earnings. As stock prices fell, bond yields declined, too — and so did mortgage rates.

The benchmark 30-year fixed-rate mortgage fell 5 basis points, to 6.48 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week’s survey had an average total of 0.37 discount and origination points. One year ago, the mortgage index was 6.78 percent; four weeks ago, it was 6.52 percent.

The benchmark 15-year fixed-rate mortgage fell 8 basis points, to 6.01 percent. The benchmark 5/1 adjustable-rate mortgage fell 4 basis points, to 6.05 percent. The 30-year jumbo, for bigger mortgages, fell 5 basis points, to 7.64 percent.

Rate: 6.52 percent (30-year fixed) Average points: 0.41

Fixed-rate mortgages soared this week and are now at their highest level in nearly 10 months.

The average 30-year fixed-rate mortgage jumped 26 basis points, to 6.52 percent. A basis point is one-hundredth of a percentage point.

The average 15-year fixed — a popular option for refinancing — shot up even higher, rising 28 basis points, to 6.12 percent. The average jumbo 30-year fixed was up 13 basis points, to 7.6 percent.

The one-year adjustable-rate mortgage was up just 2 basis points, to 6.16 percent. However, the popular 5/1 ARM jumped 27 basis points, to 6.07 percent.

Mortgage applications rose sharply after three straight weeks of decline, according to the Mortgage Bankers Association. For the week ending June 6, applications rose a seasonally adjusted 10.9 percent when compared to one week earlier.

Refinancing grew by 8.4 percent while applications for new purchases increased 12.8 percent.

Mortgage rates continued to ride the seesaw this week, down one week and up the next. This time, it was their turn to go up.

The benchmark 30-year fixed-rate mortgage rose 7 basis points, to 6.03 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week’s survey had an average total of 0.31 discount and origination points. One year ago, the mortgage index was 6.29 percent; four weeks ago, it was 5.98 percent.

The benchmark 15-year fixed-rate mortgage rose 9 basis points, to 5.65 percent. The benchmark 5/1 adjustable-rate mortgage went the other way, falling 10 basis points, to 5.85 percent. The benchmark jumbo 30-year fixed, for bigger mortgages, fell 6 basis points, to 7.32 percent.

Countrywide is currently offering a 5.875% APY and 6.20% APR on their 30 year fixed mortgage, and 5.50% APY and 5.60% APR on their Variable 5/1 Adjustable Rate Mortgages.

Of course this depends on many varying factors, and is applicable to first time Countrywide borrowers looking for a refinance.

Mortgage rates were split this week, with the 30-year fixed falling to its lowest level in more than six weeks.

The average 30-year fixed rate fell 3 basis points from the previous week, to 5.95 percent. A basis point is one-hundredth of a percentage point. The 30-year fixed has now fallen 44 basis points in the past two weeks and is at its lowest level since Feb. 6.

By contrast, the average 15-year fixed — a popular option for refinancing — moved up 7 basis points, to 5.53 percent. The average jumbo 30-year fixed fell 6 basis points, to 7.37 percent.

Adjustable-rate mortgages also were split this week. The one-year adjustable-rate mortgage moved up 11 basis points, to 6.25 percent. The popular 5/1 ARM fell 28 basis points, to 6.16 percent.

The recent sharp decline in mortgage rates has triggered a surge in mortgage applications, according to the Mortgage Bankers Association. For the week ending March 21, application volume surged 48.1 percent from the previous week.

Refinancing was particularly strong, moving up 82.2 percent from the previous week.

Mortgage rates had been moving higher until about two weeks ago. Higher rates had depressed mortgage activity, with applications falling five times in the six weeks prior to the week ending March 21.