Last RCG Mortgage Rate Post for 2009!
Rhonda Porter on 12 18, 2009
Earlier this week, the FOMC’s Statement reiterated they will wind down supporting keeping mortgage rates artificially low by the end of March. So far this year, the Fed has spent a total of $1.087 trillion to keep rates low and they have about $163 billion left. This pencils out to a mere $11.5 billion per week on average until this program ends.
Next week is a very very short week with the Christmas holiday. King County will be closed on December 24 and December 25 between the holiday and furlough days (no recordings). Snohomish County will be closed those days and closing the recorders office early on December 23. While Pierce County will only be closed on December 25.
As next Friday is Christmas, I will not be posting mortgage rates at Rain City Guide until January 2010. I hope you and yours have a wonderful holiday season and a very Happy New Year!
Conforming Mortgage Rates (loan amounts up to $417,000 for 1-unit properties). The conforming rate quote below is based on owner occupied with a mid-low credit score of 740 or higher, “full doc” purchase with a sales price of $500,000 and a loan amount of $400,000 single family dwelling (non condo). This scenario includes reserves (taxes & insurance) not being waived. Rates quoted are priced based on a 30-40 day closing with no prepayment penalties on any of the rates quoted below.
30 Year Fixed @ 1 Point: 4.625% (APR* 4.777%). 
NOTE: Last week the 30 year and 15 year were both only slightly improved by fee (not rate). Rates are slightly improved for this week’s post so that we can return to the full point for pricing with improvement to rate. The improvement to fee based on last week’s post is about 0.25% in fee. (Hopefully my next rate post in January won’t be as confusing).
15 Year Fixed @ 1 Pt: 4.125% (APR 4.384%). Please see Note above at the 30 yr quote.
10/1 ARM** 5/2/5 CAPS w/1 Pt: 4.250% (APR 5.656%). 0.125% improved in rate compared to last week’s post.
7/1 ARM 5/2/5 CAPS w/1 Pt: 3.750% (APR 5.899%). Same.
5/1 ARM 5/2/5 CAPS with 1 Point: 3.375% (APR 6.205%). 0.125% improved in rate.
Conforming High Balance Rates. Pricing is based on the same criteria above except where the loan amount is $417,001 – $567,500 for properties in King, Snohomish or Pierce Counties; specifically priced for a sales price of $625,000 and a $500,000 loan amount.
30 Year Fixed @ 1 Pt: 4.750% (APR 4.894%). 0.125% improved in rate.
Jumbo/Non-Conforming. Loan amounts up to 1 million for ARMs and 1.5 million for the 30 year fixed. The quotes below are based on 740 or higher credit scores with 80% loan to value with a loan amount of $700,000.
30 Year Fixed at 1 point: 5.875% (APR 6.026%). 
0.25% increase to rate.
7/1 ARM 5/2/5 CAPS @ 1 Pt: 4.875% (APR 6%). 0.125% increase to rate.
5/1 ARM 5/2/5 CAPS @ 1 Pt: 4.375% (APR 6.561%). Same.
FHA. Pricing based on credit score of 620 or better and loan amounts up to $417,000 for FHA in King, Snohomish and Pierce Counties. The scenario below is based on a sales price of $400,000 with 3.5% down payment.
30 Year Fixed @ 1 Pt: 4.750% (APR 5.382%). 0.125% improved in rate.
FHA-Jumbo/High Balance. Pricing based on loan amounts from $417,001 – $567,500 for King, Snohomish and Pierce Counties with a 660 or higher mid-credit score. This scenario is based on a sales price of $585,000 with 5% down payment.
30 Year Fixed @ 1 Pt: 4.750% (APR 5.311%). 0.125% improved in rate.
VA. Pricing based on credit scores of 620 or better based on loan amounts up to $417,000. VA loan amounts over $417,000 are also available. Based on a sales price of $400,000 with 0 down payment.
30 Year Fixed @ 1 Pt: 4.750% (APR 5.030%). 0.125% improved in rate.
USDA Rural Housing. 100% financing with income limits and properties must be located within a specific area (this program is generally available in rural towns with populations of 10,000 or less). For eligibility, click here. 60 day lock is quoted as USDA is a longer transaction to close. This scenario is based on $400,000 with 0 down payment.
30 Year Fixed @ 1 Pt: 5.000% (APR 5.312%). Same.
Prime Rate (what HELOCs are based on): 3.25%
This is just a small sample available of rates and products. This is not a guarantee nor is it a commitment of interest rate. Rates are as of December 18, 2009 at 8:00 a.m. and may change at any time. Available programs may change at anytime as well. To see rates that I’m quoting “live” click here.
For purposes of this post: “1 point” is 1% of the loan amount and would be reflected in line 801 or 808 (depending on whether the loan is brokered or not). Unless the rate is bought down; there are zero discount points referenced which would be reflected on line 802 of the GFE/HUD-1 Settlement Statement. Zero points means no points are paid on lines 801, 802 or 808 (this applies to all rates quoted on this post).
*APR = Annual Percentage Rate
**ARM = Adjustable Rate Mortgage. With adjustable rate mortgages, your rate may increase after the initial fixed period is over.
NOTE: Rhonda Porter and Mortgage Master Service Corporation are not affiliated with any real estate brokerages.
About the Author: Rhonda Porter
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I love that adorable photo, Rhonda! Thanks for sharing it.
I have a question for you. If someone locked in a rate 6 weeks ago at 4.75% and is doing a rate extension today and the rate is still 4.75%, why would it cost money to extend that lock?
Thanks, Ardell. I must have been about 3 or 4 with my youngest sister “on the way”.
Great question: “If someone locked in a rate 6 weeks ago at 4.75% and is doing a rate extension today and the rate is still 4.75%, why would it cost money to extend that lock?”
A rate lock is a commitment to deliver a loan within a certain period of time at that specific rate to the bank/lender. I view locking in an interest rate is “gambling” on many levels. When a borrower locks in a rate at 4.75% they (know a good deal IMO) are betting rates will not go significantly lower. If they decide to not lock at 4.75% they’re betting rates will improve. Just like gambling, you win some and lose some…you’re not always right.
“Gambling” may also takes place on the secondary markets when the rate is locked. The bank/lender may hedge the market based on their rate lock commitments. This is from RBC “How Banking Works in the US”:
Hedges are used to minimize the risk of impairment loss in the warehouse loan & commitment portfolios due to changes in the fair market value as a result of changes in interest rates.
The risks that must be hedged can be classified into 2 segments:
1) Risks related to rate locks: Originators hedge rate locks with forward sales of mortgages as well as
derivatives. Hedging the option risk in rate locks requires taking offsetting positions on some other derivative
contracts. As the mortgage option market is relatively illiquid, recourse to other option markets is common,
giving rise to basis risk. In addition, some of the rate locks are for products for which no liquid derivative
exists, which again gives rise to exposures related to cross hedging.
2) Risks related to the future sale of the mortgage loans to investors: In order to minimize exposure the impact of interest rate movements can have on the value of the loans, secondary market usually sells forward a certain amount of mortgages (app. 70% of rate commitments) based on historical pull-through (i.e closing rate) per type of product…
This is why the longer the rate lock period is, the more expensive it is. It’s riskier for the bank/lender and it’s a form of “insurance” for the borrower. This is also why bank/lenders will punish originating sources (mortgage companies) for not delivering loans they have committed via the rate lock. The punishment can include additional hits to their pricing and even worse, termination of their relationship which can be deadly to smaller companies in this market where they may only have a couple bank/lender resources. Bank/lenders will also reward mortgage companies who have a good track record of delivering (closing) the locked rates they have committed to.
In some cases, depending on the lender/bank and what their rate lock policy is, if rates are the same or better, the originator may be able to negotiate an extension at no cost–but this is becoming less available. Every lender I work with has a different policy.
In this climate, I will not lock in a client unless they understand it’s a commitment–because it is a risk to our company and I want to have as many lenders available to work with at the best prices possible. The bank/lenders provide our company with reports on what our “lock fall-out” is…it’s very critical and important for consumers and real estate agents to understand–so I’m glad you asked this question!