Uh, Oh: Mortgage Refis Plunge

Townhall.com ^ | June 12, 2013 | Mike Shedlock

[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 

[ican'tbelieveit]

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.

[cuban leaf]

HAHAHA!

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

[ProtectOurFreedom]

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.

[ProtectOurFreedom]

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.

[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.

[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.

---

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.

[G Larry]

Appraisal is today.

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

[Joe Brower]

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.

[schm0e]

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.

[lepton]

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.

[longtermmemmory]

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.

[WashingtonSource]

Bump