Who were the big originators in the first quarter of 2007? Countrywide did $115 billion, Wells did $68 billion, and Citi was third with $55 billion. (So yes, Countrywide did almost as much as Wells and Citi combined for January through March.) Industry-wide the first quarter of 2007 was down about 6% from the fourth quarter of 2006 and down 4% from the first quarter of 2006.
Rates are up around the world, including here in the US. Both our 2-yr and 10-yr stand at 4.99%, and mortgage prices continues to worsen. The Fed apparently has no thought of lowering rates and as a result the Treasury market’s yields hover near a 10-month high this morning. There is a significant psychological inflection point level of 5.0% on the 10-year yield so if we bolt through that it will not be pretty. Mortgage applications fell 1.7% last week to a 3-month low with refi’s -6.3% but purchase applications +1.5%. The news out this morning (productivity report for the first quarter showed a downward revision to 1.0% from 1.7%, but unit labor costs shot up) did not help us.
What are “experts” in the press telling borrowers who have re-setting ARM loans? “If you’re planning to sell soon after your adjustment, refinancing may not be worth the cost and headaches. But if you’re planning to stay in your home for a while, you’d be wise to lock in a fixed rate now. If you can handle the kicker of a higher monthly payment, you can get a loan you’ll never have to worry about again.” But as most originators know, as mortgage rates inch up, the choice is not so clear, and much depends on how long the borrower will live in their house. Some borrowers who bought at the peak of the market with interest-only and option ARMs — who now have little, if any, equity in their homes — could have trouble qualifying for the higher payments of a fixed-rate mortgage, and will have to consider tighter underwriting and prepayment penalties.
The Broken Mower
When I was a kid our lawn mower broke and wouldn’t run, my Mom kept hinting to me that I should fix it. But, somehow I always had something else to do – sports, TV, even homework was something more important to me.
Finally she thought of a clever way to make her point. When I arrived home one day, I found her seated in the tall grass, busily snipping away with a tiny pair of sewing scissors. I watched silently for a short time and then went into the house. I was gone only a minute, and when I came out a gain I handed her a toothbrush.
I said, “When you finish cutting the grass, you might as well sweep the driveway.”
The doctors say I will walk again, but I will always have a limp.
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