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Mortgage markets take a turn for better

As everyone knows, the mortgage industry has been somewhere between complete chaos and utter chaos for the last several months. Nevertheless, those of us who “tended our knitting” have been able to get most people who wished to apply for a mortgage a fairly good one, although there have been some exceptions.

Hundreds of companies and probably thousands of loan programs have simply “left the building” so to speak. Officially, stated income/stated assets and “NINJA” (no income, no job or assets) are no longer available. Although there are some low doc options left out there they are only for those who have lots of equity and perfect credit.

In recent weeks, though, we have seen some glimmer of hope that things may start returning to normal this year. Of particular note, adjustable-rate mortgages are slowly starting to make sense. For the last several months adjustable-rate loans have most of the time cost more than fixed-rate loans. Finally, three- and five-year fixed ARMs are being priced appropriately and may make sense for borrowers. Beware, though, that these still aren’t always the best deal because they often require paying a point or more up front, and you might get a not much higher rate on a fixed without paying any points.

The biggest news of late though is that the new (and temporary) “agency jumbo” rates have become much lower. Agency jumbos are for loans between $417,000 and $729,750. These were introduced in March and were pegged at as much as a point higher than a conforming loan below $417,000. Recently they have been about 1/8 percent higher than conforming loans. There are some substantial limitations on the availability of these loans so before you get too excited, call your lender to discuss your situation to see if these are right for you.

Traditional jumbo loans, (which range from $417,001 up to several million) have far fewer limitations in regards to qualifications but the rates these days are about 1-2 percent higher than conforming loan amounts.

As to the impacts of the much vaunted “rescue” programs, about all I can say is I am glad no one I know is waiting for a lifeline from these programs as I am somewhat pessimistic of any government rescue effort. I’m not so sure that those who are already underwater are not going to get sucked into the propellers of the life boat. As lenders we have only sketchy details on how these will work, and fortunately there are not many homeowners in Eagle County who are in the dire straits that some homeowners in other parts of the country are in.

As with any government program, there are always strings attached. One big one to be addressed is the strings attached to a bank that makes a loan under the terms of one of these new rescue programs and the agency (Fannie Mae, Freddie Mac or FHA) that buys the loan. Traditionally if a loan the agencies purchase goes bad the original lender (and sometimes the mortgage broker) have some liability for losses.

If that liability persists you may see the government flaunting that these magic loans are available but few lenders or brokers will touch them because of potential liability down the road and few borrowers will be able to benefit. However you can bet the politicians who dreamed these things up will benefit from publicity around election time from all their heroic efforts to save the housing markets.

Chris Neuswanger may be reached at Macro Financial in Avon at 970-748-0342. He welcomes mortgage related inquiries from readers.


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