Bank Warns Customers: Your Mortgage Is Toast!

If you’re interested in what’s been happening in the mortgage market this week, then run to the Field Check Group blog, which continues to deliver some awesome on-the-ground reporting of the industry.

The letter below was sent from a major bank to customers basically telling them that if you haven’t locked down a rate, but you’ve applied for a mortgage, you can forget about it for now. With rates moving so dramatically, banks are scrambling to complete the loans of people who had rates locked. Unlocked deals are being kicked to the side.

Another very interest trend: The return of exotic loans!

Aggressive 3/1 and 5/1 conforming interest-only hybrid intermediate-term ARM rates are being offered from a variety of lenders…that long of a name just sounds exotic, no?  That is because they are. At present the mid-to-high 4% is still available – about the same rate as a 30-year fixed a month ago.

With 30-year fixed rates loans the top choice this time around, these bubble-year’s favourites have been avoided like the plague.  However, some that were caught off guard and that must fund a purchase or refi will opt for these. If short rates stay down and long up, these just may get real popular again as they were in 2003-2005. However, if long rates keep moving higher or the market gets even more volatile, I would not expect these to hang around these levels for too long.

For borrower’s that can deal with an ARM, CITI was leading the pack yesterday. If 30-year rates stay up, ARM rates down and the refi-boom shifts to short duration 3/1 and 5/1 financing, what are we setting ourselves up for in three to five years.

Read the whole thing >


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