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Uh, Oh: Mortgage Refis Plunge
Townhall.com ^ | June 12, 2013 | Mike Shedlock

Posted on 06/12/2013 5:10:53 AM PDT by Kaslin

Curve Watchers Anonymous has been watching the rise in interest rates across much of the yield curve.

Yield Curve as of 2013-06-11

 

click on chart for sharper image

As one should suspect, mortgage rates have been rising in conjunction with the rise in treasury rates. Here is a chart from Steen Jakobsen, Chief economist at Saxo Bank in Denmark.



Note the annotation "30 Yr mortgages rate is up 76 basis points on the year with no growth increase". the phrase "no growth" pertains to lack of growth in the overall US economy.

BankRate notes the following 3-month trends.

30-Year Mortgage Rate



15-Year Mortgage Rate



5/1 ARM Mortgage Rate



As one might suspect this rapid rise in mortgage rates will wreak havoc on mortgage refinancing. And it did. I called a couple of my industry contacts and they state refinancings have plunged by 50% or more.

One contact says there has been spillover into new home applications, another has not seen that "yet".

Word About Convexity

As rates rise, three things happen.
 

  1. Refinancings plunge
  2. Losses mount
  3. Hedging increases


Bloomberg discusses convexity hedging in its report 


TOPICS: Business/Economy; Culture/Society; Editorial
KEYWORDS:
More in the link
1 posted on 06/12/2013 5:10:53 AM PDT by Kaslin
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To: Kaslin

I think I know why refi’s are “plunging” - the process isn’t going nearly as smooth as it used to.

We do some RE investing - rentals, etc.
Refi’s in the past have been a breeze.
Recently, though, I’ve been in a refi process for my own house for over 5 months.

Telling.


2 posted on 06/12/2013 5:13:50 AM PDT by MrB (The difference between a Humanist and a Satanist - the latter admits whom he's working for)
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To: Kaslin

Everyone and his brother has refied, at 4% or below. Unless interest on a 30 yr goes to 2% the refi market will be dead for a long time.


3 posted on 06/12/2013 5:15:42 AM PDT by central_va (I won't be reconstructed and I do not give a damn.)
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To: Kaslin

Here’s a “curve”.

30 yr fixed rose 0.75% in the 2 weeks we waited for the seller’s lawyer to get off of his dead butt to write the contract.

Don’t bother listing the options we might have had.....seller insisted on using her lawyer.


4 posted on 06/12/2013 5:17:40 AM PDT by G Larry (Let his days be few; and let another take his office. Psalms 109:8)
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To: MrB

About 3 or 4 months ago I did a VA ‘streamline’ refi on my house. Sailed through in a month. Glad I did it when I did.


5 posted on 06/12/2013 5:21:33 AM PDT by tgusa (gun control: deep breath, sight alignment, squeeze the trigger .......)
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To: Kaslin

A turd will only float for so long.

LLS


6 posted on 06/12/2013 5:24:14 AM PDT by LibLieSlayer (FROM MY COLD, DEAD HANDS!)
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To: G Larry
On paper the .75 does not sound like much BUT when one looks at the increase over where it was a month ago, it is staggering.

This is similar to rising rates around 1980. I was buying a home then, awaiting mortgage clearance, and the rates were literally going up half a point a week some weeks. Over the 3 months it took to get my mortgage “approved” rates had climbed from 9% to something like 13% and I barely qualified for that.

When the FED turns off the spigot, if not already done so, rates are going to skyrocket, the deficit will blow out of bounds due to the shortness of maturities in our indebtedness and his maximum eminence will be crying all the way to the podium to blame bankers, the FED, the GOP, and perhaps even FOX News for his bankrupt budget.

7 posted on 06/12/2013 5:31:05 AM PDT by Mouton (108th MI Group.....68-71)
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To: Kaslin

Folks have gotten used to low, low mortgage rates. Even a minor blip up puts people in a holding pattern until the rate comes back down. Can’t blame them. The FED has taught us that low rates are a “right”.

Unfortunately, this “blip” could very well morph into a blob. Bad news for the frail recovery of the sales market.


8 posted on 06/12/2013 5:44:23 AM PDT by moovova
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To: Kaslin

Not to mention that PMI will be required for the entirety of the loan on FHA loans, so there is no point in doing a refi anymore if you have an FHA loan. Last year they required doubling up on PMI, now they make it a permanent fixture.


9 posted on 06/12/2013 5:55:59 AM PDT by jurroppi1
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To: Kaslin

The topic is refinancing.

It would seem the reason for the drop off is saturation. Those who want to refinance have done so.


10 posted on 06/12/2013 6:08:39 AM PDT by bert ((K.E. N.P. N.C. +12 ..... Who will shoot Liberty Valence?)
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To: MrB

I just finished refinancing our jumbo. In hindsight I’d rather poke sticks in my eyes than do it again.


11 posted on 06/12/2013 6:09:12 AM PDT by skeeter
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To: skeeter

Similar situation here - refi from an ARM at 3.75 to a fixed 30 at 3.86.


12 posted on 06/12/2013 6:13:56 AM PDT by MrB (The difference between a Humanist and a Satanist - the latter admits whom he's working for)
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To: Kaslin

As rates rise, three things happen.

1.Refinancings plunge
2.Losses mount
3.Hedging increases


There is actually a fourth thing. It is explained in the phrase, “People don’t buy a price. They buy a monthly payment.”

I.e. an interest rate rise creates downward pressure on prices of all financed goods and services.


13 posted on 06/12/2013 6:14:42 AM PDT by cuban leaf (Were doomed! Details at eleven.)
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To: G Larry

Did you tell her, “never mind”?


14 posted on 06/12/2013 6:15:34 AM PDT by cuban leaf (Were doomed! Details at eleven.)
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To: moovova

Unfortunately, this “blip” could very well morph into a blob. Bad news for the frail recovery of the sales market.


I didn’t believe rates could possibly go up because it would be fatal to an economy already barely surviving on life support.

Apparently national suicide is the next tactic to be used by our non-elected leaders. This’ll be VERY interesting to watch, though not a lot of fun.


15 posted on 06/12/2013 6:18:04 AM PDT by cuban leaf (Were doomed! Details at eleven.)
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To: Kaslin
Fortunately my refi was in the pipeline, rate locked in, before rates began bouncing back.

Rates have been very low, yes, but your credit score had better be close to perfect; and your appraisal (dictating the maximum amount you can borrow) may come in shockingly low.

Fortunately, I wanted to pay down about half of my mortgage, and I wanted to go from an ARM to a fixed 10-year mortgage. My rate: 2 5/8.

:-)

16 posted on 06/12/2013 6:30:14 AM PDT by southernnorthcarolina ("Better be wise by the misfortunes of others than by your own." -- Aesop)
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To: cuban leaf
Gubment had to keep rates down for awhile. There were a lot of rate resets still in the pipeline. Had to give those mortgage holders time to refinance at the lower rates. Otherwise, automatically resetting to higher rates would've brought another mega-round of foreclosures...


17 posted on 06/12/2013 6:38:34 AM PDT by moovova
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To: MrB

Heck, we have 820s credit ratings borrowing than less than I make in a year for a house with very little DEBT and it took 5 months to close. Just simply stupid crap happening in the market right now....


18 posted on 06/12/2013 6:49:24 AM PDT by fuente (Liberty resides in three boxes: the ballot box, the jury box and the cartridge box--Fredrick Douglas)
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To: MrB

Heck, we have 820s credit ratings borrowing than less than I make in a year for a house with very little DEBT and it took 5 months to close. Just simply stupid crap happening in the market right now....


19 posted on 06/12/2013 6:50:07 AM PDT by fuente (Liberty resides in three boxes: the ballot box, the jury box and the cartridge box--Fredrick Douglas)
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To: fuente

Dittos... I’m not in too much of a hurry, though.
The monthly is currently lower on the ARM than it will be on the fixed, and it doesn’t adjust for quite a while.

I’m just gambling that the fixed rates are going up soon.


20 posted on 06/12/2013 6:52:33 AM PDT by MrB (The difference between a Humanist and a Satanist - the latter admits whom he's working for)
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To: MrB

I have been working on refinancing our house and rental. I had to be a pest to finally get the house closed... just over 3 months. I am still waiting on the condo.


21 posted on 06/12/2013 6:57:06 AM PDT by ican'tbelieveit
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To: moovova

HAHAHA!

I actually saved that picture on my computer several years. ;-)


22 posted on 06/12/2013 6:58:20 AM PDT by cuban leaf (Were doomed! Details at eleven.)
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To: Kaslin

Thank goodness we refied at the beginning of May, locking in 30 year fixed. The title company even hired a contractor to come to our house to close escrow. What a nice service — closing escrow in the comfort of our home at a time of our choosing.


23 posted on 06/12/2013 7:01:13 AM PDT by ProtectOurFreedom
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To: skeeter

Funny, ours was a breeze. Our kitchen was in the middle of a remodel, so most lenders wouldn’t even talk to us until it was done and we had the final permit. Evergreen bank agreed to the refi with the remodel in progress, approved us in nothing flat, gave us a great rate, and sent an escrow agent to our house to close the deal. I think we dealt with the bank entirely on phone, email and mail. It was the sweetest, fastest, and easiest refi we’ve done and under difficult circumstances with the kitchen underway. I highly recommend this bank if they are in your area.


24 posted on 06/12/2013 7:06:51 AM PDT by ProtectOurFreedom
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To: cuban leaf

When the wife finds the perfect house on the perfect 5 acre parcel, moving on is not an option.

We did save about $50K by seller not having realtor involved.


25 posted on 06/12/2013 7:16:59 AM PDT by G Larry (Let his days be few; and let another take his office. Psalms 109:8)
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To: G Larry

When the wife finds the perfect house on the perfect 5 acre parcel, moving on is not an option.

We did save about $50K by seller not having realtor involved.


Very similar to our story inasmuch as we bought for the same reason (only it’s 12 acres). When you buy the house and land you really want, it’s not an investment any more than buying a corvette over a Camry is an investment. It’s what you want and your budget determines the price, not real estate values.


26 posted on 06/12/2013 7:19:14 AM PDT by cuban leaf (Were doomed! Details at eleven.)
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To: cuban leaf

Appraisal is today.

I’m betting it comes in $100k over purchase price.


27 posted on 06/12/2013 7:24:34 AM PDT by G Larry (Let his days be few; and let another take his office. Psalms 109:8)
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To: Kaslin
I have an investment property (my previous house, which is now a rental), and on those, no mortgage company will give you the time of day. In 2008, the same companies that were throwing money out the back of the truck like confetti now won't let go of a dime.

If you are refinancing the house you live in, that's another story -- apparently HARP 2 or somesuch had the FedGov pointing a gun at the banks' heads, at which point they solicited ME a year ago, and I got a helluva deal on my 'homestead'. But for my rental (Wells Fargo, which the same company also holds the mortgage on), not a chance.

The rental in question has less than four years remaining on a 15-year note, and costs me $1,400 a month (not counting property taxes and insurance). A new 30-year loan would reduce this to $400 a month. But somehow these geniuses can't see how that can work.

So in four years, I will own the place, and they won't get another damned nickel. I will never deal with Wells Fargo again -- I don't care if they starve.

28 posted on 06/12/2013 7:51:25 AM PDT by Joe Brower (The "American People" are no longer capable of self-governance.)
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To: cuban leaf
As rates rise, three things happen.

Rates rise and fall, but they also rise and rise.

And having fallen for so long....

Think real assets.

29 posted on 06/12/2013 8:34:53 AM PDT by schm0e ("we are in the midst of a coup.")
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To: MrB

Yup, and I suspect that the early part of the rise will have some jumping in to refinance as a “last chance” for a while, which will partially disguise the extent of what the drop will be.


30 posted on 06/12/2013 9:39:13 AM PDT by lepton ("It is useless to attempt to reason a man out of a thing he was never reasoned into"--Jonathan Swift)
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To: Kaslin

because people have realize refi’s are a rip off?

they are used by the banks to get 100% of their profits AND A USEROUS BONUS.

they are used to conceal the MERS illegality.

they are used to force people who are desperate to way any rights or claims in defects.

they are used to reduct the JOKE of a “settlement” that the varous state attorneys “won”. IOW it was essentially a coupon victory and only political BS for the attornies general.


31 posted on 06/12/2013 5:53:06 PM PDT by longtermmemmory (VOTE! http://www.senate.gov and http://www.house.gov)
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To: Kaslin

Bump


32 posted on 06/13/2013 4:20:08 AM PDT by WashingtonSource
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