A Word on Friday Rates
Rhonda Porter on 09 7, 2008
Just a few quick thoughts I want to share with you about the rates that I’m posting here at Rain City Guide on Friday afternoons.
First of all, the rates shown are really only intended to serve as guide. They really just point out the direction rates are trending (thanks to The Tim’s addition of the up/down arrows). If someone’s credit score is off by one digit or if the closing is taking place a few days longer or shorter, the rate may very well reflect this. There are several factors that impact the pricing of a mortgage interest rate.
For example, shortly after posting rates last Friday, a home owner contacted me regarding a rate quote for a 30 year fixed rate/term refinance for a loan amount around $550,000 with a mid credit score above 740. The rate I had just published for a jumbo conforming purchase based on a 720 credit score is 6.125% (6.273% apr). The rate I provided on my Good Faith Estimate (I don’t like to do personal quotes without providing a GFE) for this person was actually 5.875% (apr 6.015%). Both rates used at RCG and my GFE were priced with a 1point (origination/discount) and rates had not just improved after the posting of rates last Friday. The differences were the pricing factors, mainly: credit score, loan amount and length of lock period. About a half hour later, after reviewing the GFE the home owner contacted me to see if the rate would be valid through the weekend (unlocked) so they could think about the refinance–the rate had all ready changed. I could no longer offer 5.875% at 1 point for their scenario. Rates had increased (many lenders issued 3 rate sheets with price changes on Friday) by 0.25% to fee or 0.125% to rate. (This really illustrates why someone needs to be ready to pounce quickly on a rate when the blip lower).
The other topic I wish to point out with regards to my Friday Rate posts is that I can only post what I have available to me. As a Correspondent Lender, we have many resources for funding mortgage loans. However I must admit, we (as are many mortgage companies) are shallow in the jumbo pool. There just isn’t a lot of resources available right now since Wall Street does not have an appetite for these big mortgages. What I’m quoting for jumbo (loan amounts over $567,500) is the best 30 year fixed rate that I have available. You may be able to find a better jumbo rate by shopping around various resources (such as credit unions, small community banks that portfolio loans, etc.) during these times. I had an interesting conversation with another LO in a thread regarding quoting jumbos with a 1 year prepayment penalty and it’s just something I’m not comfortable doing in a format such as this. Prepayment penalties can be used to bring your rate down-they are in fact prepaid interest. But it’s a significant lump of dough to hit a consumer with in the event they are not able to retain their mortgage as long as they originally planned. All rates that I quote for purposes of Friday Rates are free of any sort of prepayment penalty. I look forward to the day when I can offer more competitive pricing/quotes on loans over $567,500…but I’m afraid it may be a while!
I have learned recently that we do have a competitive jumbo ARM product, however it’s my understanding that working with this lender is a nightmare. Another bank we work with is offering more competitve rates (than I quote) for a 30 year fixed jumbo, however they are 4 weeks in underwriting (we have a broker relationship, not a correspondent so they would be underwriting). If we add a lender that has more to offer, I’ll make note of it when I post the rates so you know it’s not that the market has improved that much, it’s that my selection of jumbo lenders improved.
Again, just to make it loud and clear, the rates I posts both here at Rain City Guide and Mortgage Porter are only for reference. You should always obtain a “custom” rate quote Good Faith Estimate created for your personal scenario by a local mortgage professional.
About the Author: Rhonda Porter
- Author's website: http://www.mortgageporter.com
- More posts by Rhonda Porter
- email the author
4 Responses to “A Word on Friday Rates”
Leave a Reply
Live Comment Preview
Popular Posts
Recent Posts
Recent Comments
- Rhonda Porter: Some of the fine tun
- Rhonda Porter: you must be so excit
- Jerry Gropp Architect AIA: Hi Rhonda- Good to s
- Chris Cliff: I am glad to see the
- Leanne Finlay: Tim, eventually I'll
looks like I keep running into you Rhonda.
First AR, now here. =0)
The blogosphere isn’t as big as it sometimes seems is it??
Chris the IMplementer
Rhonda:
I think how you quote rates here is just fine, even admirable, and is generally accurate.
Your point in this column supports my earlier points: rates are customized for each situation, and can turn on a small variable (level of risk, loan type or size), and timing.
I do not think you should quote rates based on a pre-payment penalty. The borrower had asked if there was something better available, and there was, in wholesale.
Most of the lowest cost/rate lenders in the wholesale market are a bit difficult to deal with, and always have been, you just have to figure out their quirks.
The art of brokered lending is to match the borrower with the appropriate lender.
Thanks again for the service you perform here, and keeping it real.
Chris, I really don’t spend much time at AR. A majority of my articles you’ll find here, on my blog and Mortgage Cicerone.
Roger, rates posted are not done for competing purposes or to “win” transactions. It’s really just a tool for market trends. But I won’t quote rates if the lender is terrible to work with or if it includes a prepayment penalty–I’m totally aware of wholesale markets–I’ve worked for (the same) correspondent lender for over 8 years.
There’s just some places I won’t go just to “get the deal”–the client is what’s most important. There are cases where a credit union or small private bank may have better rates/programs than even the wholesale markets.