What’s up with mortgage rates? Jeff Lazerson of Mortgage Grader in Laguna Niguel gives us his take.
Rate news summary
From Freddie Mac’s weekly survey: The 30-year fixed rate averaged 4.60 percent, up 6 basis points from last week’s 4.54 percent. The 15-year fixed averaged 4.06 percent, up 7 basis points from last week’s 3.99 percent.
The Mortgage Bankers Association reported loan application volume decreased 1.8 percent from the previous week, and Attom Data Solutions reported loan origination volume dropped to a four-year low during the second quarter.
Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $453,100 loan, last year’s payment was $217 lower than this week’s payment of $2,323.
What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages for a zero-point cost: A 15-year at 3.75 percent, a 30-year at 4.375 percent, a 15-year high-balance ($453,101 to $679,650) at 4.0 percent, a 30-year high-balance at 4.50 percent 15-year jumbo (over $679,650) at 4.625 percent and 30-year jumboat 4.75 percent.
What I think: Last week’s column explained what Congress needs to do with Fan and Fred’s “guarantee fee” (which I call a pricing tax), the shell game some builders play with closing costs and design upgrades and my call for allowing five-year balloon payments for hard money loans.
This week is dedicated to four more consumer protections that Congress needs to act on.
1) Ten years ago to the month the mortgage crisis was in full meltdown when Lehman Brothers went belly up and Fannie Mae and Freddie Mac were put into U.S. government conservatorship. Can you think of anyone who went to prison for the housing implosion? Last December, I wrote a column explaining that the Consumer Financial Protection Bureau (mortgage police) could not cite a single case of a mortgage license getting yanked.
Congress should empower all industry regulators to ban bad actors, not just bad licensees or bad companies from the mortgage arena. Much of the egregious behavior was from industry executives who didn’t need a license to be in the business. And, if history is any indication, nobody is going to jail.
2) Dodd-Frank required lenders to charge the same regardless of loan type or loan size — a one-point compensation across the board, for example. It was to encourage fair lending.
One unintended consequence is small-loan borrowers get little attention or inexplicably get denied. Loan originators and their employers would rather get paid one point ($10,000) on a $1 million loan rather doing 10 loans for $100,000 for the same compensation.
The Urban Institute issued a paper in July pointing out the dramatic jump in credit denial rates for small mortgages last year.
Loan originators and mortgage companies should have the discretion to reduce their pre-set compensation charged to the mortgage shoppers. Some underserved borrowers may charged less and more attention. Too many originators and their companies are currently discounting for larger loan sizes. They are no longer afraid of the mortgage police as enforcement of these equal-pricing Dodd-Frank requirements seem to be non-existent.
3) Banks, credit unions, government-sponsored enterprises like Fan-Fred, FHA and the VA, as well as the Small Business Administration should be viewed as utilities. No overlays. No discretion to blackball.
Any business that is legal under state or federal law should have access to these important institutions.
We can’t have legal, yet perhaps politically unpopular businesses getting banned by lenders just because the business might be a political hot potato like a gun dealer or the California marijuana industry.
4) The worst rule in the history of mortgage lending was the Home Valuation Code of Conduct that was rolled up into Dodd-Frank. It needs to be reversed.
Loan originators and mortgage lenders know best when it comes who are the top-tiered appraisers. They should be able to direct business to those best in class.
Todays’ blind round robin system gives equal work to undeserving appraisers, unfairly enriches appraisal management companies at the expense of consumers and appraisers and nullifies countless numbers of loan approvals because properties were unfairly low-balled in value.
Fannie and Freddie have very good data they can use as a pre-funding check and balance to guard against fraudulent or inflated appraisals.
Mortgage broker Jeff Lazerson can be reached at 949-334-2424 or jlazerson@mortgagegrader.com. His website is www.mortgagegrader.com.
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