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Jumbo Mortgage Rates Report--July 21, 2011- MARKET ALERT

LA JOLLA, CA--Jumbo mortgage rates are essentially unchanged since my last report (rate indications offered below) and that worries me.  Wall Street may be overconfident of a debt-ceiling hike deal and that overconfidence is priced into the market. 

In Washington, it can be tough to understand why New York is so sure of itself. While Wall Street is brimming with confidence that a deal will be struck, many Washington officials say the dynamics of this stalemate are different from any other they have encountered. And that means New York traders could be in for a big surprise in early August.

With less than two weeks to go before the Aug. 2 deadline, no deficit-reduction plan offered by the Senate or House has gained a significant amount of momentum. The House GOP’s “cut, cap and balance” proposal is dead on arrival in the Senate, which has yet to move its own budget. 

This means that a failure to extend the federal borrowing limit will catch markets by surprise; we could conceivably see jumbo mortgage rates rise 1-1.5% overnight, in early August.I've worked with mortgage-backed securities traders and I'm amazed at the huge gamble they're taking.  The culture of government bailouts is so pervasive in the financial community that the very flinty-eyed bankers are willing to ignore this risk.

Could jumbo mortgage rates go lower?   I suppose they could but not much.  There is clear and present risk right now.  If you CAN, lock your mortgage rate to avoid this risk.  

Jumbo Mortgage Rate Indications, as of July 11,, 2011:

• 5/1 ARM----------3.875%/4.110% APR
• 7/1 ARM----------4.375%/4.571%APR
• 10/1 ARM---------4.750%/4.917%APR
• 30 Yr Fix----------5.125%?5.557%APR
• 30 Y FNMJmbo-4.500%/4.724%APR
• 30 Y FNMA-- ----4.375%/4.615%APR

Jumbo mortgage rates quoted are for loan amounts from $700,000 to $2,000,000.  Credit, down payment, and income restrictions apply.  Not all will qualify.  Equal Opportunity Lender.  NMLS ID 339261

How Long Must I Wait, After A Short Sale, Before I Can Get A Mortgage?

Mortgages can be approved as early as one day after a short sale but the down payment requirements and terms are onerous.  San Diego private money lenders will make loans the day after a short sale but usually require at least 30% of the purchase price as a down payment.

Agency conforming loans (formerly known as conventional loans) can be secured in as little as two years after a short sale if the borrower has at least 20% of the purchase price for a down payment.  If the borrower has less than 20% down payment, then the waiting period extends to five years.

FHA loans require that the borrower wait at least three years, like a foreclosure, unless the previous loan had no late payments and the deficiency balance was paid-in-full (which sort of defeats the purpose of a shor sale).

VA loans can be secured as soon as two years after a short sale unless the seller is an active-dutymember using the HAP program (offerered to active-duty members who had a permanenent change of station <PCS>)

Jumbo Mortgage Rates Report--July 11, 2011

Jumbo mortgage rates gave returned to the end of June levels as the mortgage bond market reacted to a weak employment report and more fear about bloated PIIGS (European government default risk).  I talked about this in my Jumbo Mortgage Rates report for July 5, 2011.  

I digress but I'd be remiss if I didn't tell you that today is Free Slurpee Day.  Slurpees can cause Brain-Freeze.   I would love to freeze today's mortgage rates for a week or so but I'm not so sure the markets will accomodate.  Last week, I suggested you could hold out for lower rates; that happened.  Today, I think it makes complete sense to lock-in your mortgage rate at application.  While rates could trend lower, the risk of them rising another .25%...quickly, far outweighs the reward of them improving by .125%.  As always, my advice may not be perfect for you so it's best to speak with your loan originator.

Jumbo Mortgage Rate Indications, as of July 11,, 2011:

• 5/1 ARM----------4.000%/4.210% APR
• 7/1 ARM----------4.375%/4.571%APR
• 10/1 ARM---------4.625%/4.807%APR
• 30 Yr Fix----------5.125%?5.557%APR
• 30 Y FNMJmbo-4.500%/4.724%APR
• 30 Y FNMA-- ----4.375%/4.615%APR

Jumbo mortgage rates quoted are for loan amounts from $700,000 to $2,000,000.  Credit, down payment, and income restrictions apply.  Not all will qualify.  Equal Opportunity Lender.  NMLS ID 339261

Jumbo Mortgage Rates Report- July 5, 2011

Why do La Jolla, CA home buyers keep watching the riots in Greece?

Once again Greece threatened default on its soveriegn deb.  This sent shockwaves through the world financial markets.  This time around, the European Union was offering less solidarity and more austerity to its little peninsular cousin.  Capital fled European markets and into American treasury bonds during the middle of June.  This drove bond yields down which caused jumbo mortgage rates to decline to their lowest levels since 2004.

Last Monday, we locked a $500,000 loan, at 4.75% (30 year fixed), with no fees or discount points.  We locked a $1.1 million loan at 5.125% (30 year fixed), with no fees or discount points.  Today, those same loans would be more expensive by a discount point (1% of the loan amount).  This means that the first buyer would have to bring an extra $5,000 to closing today, and the second buyer would have to bring $11,000 to closing today , just to get the same rates.

Why are jumbo mortgage loans so much more expensive today than they were last Monday?  Greece struck a deal with the European Union to get emergency loans.  That action reassured golbal financial markets that a Greece default would be stayed.  Money flowed into equities and out of the safe haven of US Government securities.  Mortgage bond investors demanded higher yields from mortgage originators which was passed onto the retial borrower.

In which direction will jumbo mortgage rates head this summer?  I believe rates will be stable through Labor Day with some erratic movements upwards.  The federal Reserve bank has halted its quantitative easing plan.  While this should pressure jumbo mortgage rates higher, Greece is but the first of many sovereign default crises bubbling beneath the surface of a calm Mediterranean Sea.  I expect those threats of crises will hold the upwards pressure in check. 

If you can, lock a jumbo mortgage rate under 5%.  If higher than 5% is offered, you might pause to read what's happening in Europe.  Anothe ron of these crises could afford you that rate under 5%.