Mortgage Applications Surged By Record Amount
NEW YORK (Reuters) - Mortgage applications surged by the largest amount on record last week as a new Federal Reserve program pushed interest rates down to their lowest level in more than 3 years, data from an industry group showed on Wednesday.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.47%, down a whopping 0.52% from the previous week, the largest drop since 1990 when the MBA started conducting the weekly survey (see chart above).
HT: Ben Cunningham
7 Comments:
I wonder what happens when a mortgage in a mortgage backed security gets paid off. I imagine somebody in the financial industry gets a bonus.
They get a bonus for everything else! ;)
No, mj, that's prepayment, and prepayment is bad. Imagine you buy a nice 5-year CD from your bank. Next month, they give you one month's interest and return your principal. Why would you like that?
I may be stupid - no take that back - I am stupid - but what would it cost to do the following...
1. Tell the mortgage holders they can lock in their rates at 6% for 30 years on their sub-prime loans - and if they do...
2. The government will pay the difference between 6% and 4.5%.
3. The consumer gets a lower payment and some relief for extending the term to 30 years in most cases - and a chance to stay in their home (but they lose some of their interest deduction since it is base on the 4.5% rate...
4. Without getting too crazy I can imagine a similar program for property taxes - if they roll back taxes 15% - the Feds cover 2/3 of this - but if more people are then able to stay in their homes the community does not lose the 5% gap since they should have more properties on the tax roles.
Wouldn't this "fix" a lot of the problem - avoid all the nasty costs of foreclosure etc...
What am I missing?
With all due respect, I believe your headline to be somewhat misleading. It was a record "surge" in mortgage applications, not a record in mortgage applications. And there is also quite a bit of discussion regarding percentage of refinances, how many were previous applications that were canceled and re-applied for due to rate decrease, etc.
I don't mean to be negative, just accurate.
wcw said:
No, mj, that's prepayment, and prepayment is bad. Imagine you buy a nice 5-year CD from your bank. Next month, they give you one month's interest and return your principal. Why would you like that?
Subprime borrowers pay a risk premium in the form of higher rates and fees.
So one might EXPECT that in a (market-perceived) high-risk transaction, prepayment (and the certainty of getting your money back) would be a good thing, but NOOOOOOO, it's seen as a bad thing.
WTF is up with that? How can a subprime borrower avoid getting hosed right from the start?
Being poor is expensive.
"What am I missing?"
Someone must pay for these subsidies.
If demand for something (mortgages) exceeds supply, shouldn't prices increase?
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