« Wednesday Links What's Up at the Sumner Avenue Armory? »

December 3, 2008

Refi Wave on the Way?

While mortgage rates haven't kept pace with the plummeting Fed Funds Rate, the 30-Year Fixed rate has come down almost 75 basis points in recent weeks to a national average of around 5.7% yesterday. The recent trend got a boost last week from comments by Ben Bernanke that the Fed, which doesn't have much fire power left with its signature rate (how much lower than 1% can you go) may start trying to impact the long end of the curve by purchasing U.S. Treasurys. According to Bloomberg, refinancing can already make sense for home owners with existing mortgages of 5.5% or higher. Presumably a wave of refinancings would help both the real estate market and the overall economy, generating fees for banks a lowering carrying costs for owners. Have any readers been looking into refinancing? Excuse us while we go have a look at the fine print on our mortgage now.
Long Bond Returns Most Since 1995 [Bloomberg]
30-year Fixed Mortgage Rates Down Tuesday [Bankrate]
Graph from Seeking Alpha

Trackback Pings

TrackBack URL for this entry:
http://www.brownstoner.com/mte/mt-tb.cgi/7449

Comments

I think you meant "refinancing can already make sense for home owners with existing mortgages of 6.5% or higher"

Posted by: daveinbedstuy at December 3, 2008 9:16 AM

Have any readers been able to confirm the rise in non-conforming loan amount? to 600 thou or so? Heard it discussed, but never heard of anyone actually utilizing.

Posted by: Johnny at December 3, 2008 9:21 AM

Hmm, this story is now 10 minutes old and we still have yet to see a cut and pasted, vitriolic, poorly written post regarding "November Layoffs Hit Highest Level in 7 Years" or BofA announcing up to 30,000 layoffs? I wonder if our friend is ok.

Posted by: Biff Champion at December 3, 2008 9:21 AM

I am not sure how many home owners have 20% equity remaining in order to satisfy the banks requirement of a 80% loan to value. My educated guess as someone who is in the business for 2 decades would bet that the owners in most need to refi are leveraged to the max and possibly under water.

Posted by: commonsense at December 3, 2008 9:23 AM

Thanks for bringing the asshats back to reality, commonsense. Now back to the implosion...

Posted by: 25 to 50 Percent Drop at December 3, 2008 9:29 AM

That would make more sense, Dave, but the Bloomberg article said 5.5%. Guess they could have made a mistake.

Posted by: brownstoner at December 3, 2008 9:31 AM

It usually isn't worth it to me to refi. Currently have a 6.25 30 year fixed. I would estimate that I have 70-80 percent in equity (for the moment) so that isn't an issue. I've been in my place long enough to have been underwater with 25% down in the early nineties. Because of the additional amount of recording taxes that will be added to the principle rates have to fall at least a full percentage point for me save anything and the savings is negligible for me.

Posted by: gowanusdog at December 3, 2008 9:46 AM

I've got the equity and I'm doing a refi. I guess that makes me an asshat.

Posted by: slopefarm at December 3, 2008 9:54 AM

Asshats rule slopefarm.

Posted by: daveinbedstuy at December 3, 2008 10:03 AM

Er, Dave, you need a comma in there at 10:03.

The larger point is that I disagree with commonsense above -- I think you would have had to have bought pretty recently in Brooklyn and with 20% down to have a potential LTV problem for refi, and only in some areas. In my little wood frame and vinyl neck of the woods, for example, there are some pretty astonishing comps.

Posted by: slopefarm at December 3, 2008 10:14 AM

"Hmm, this story is now 10 minutes old and we still have yet to see a cut and pasted, vitriolic, poorly written post regarding "November Layoffs Hit Highest Level in 7 Years" or BofA announcing up to 30,000 layoffs? I wonder if our friend is ok."

Naw Numbnuts I don't have to. The implosion is well underway..

Now if you look it this way most of the Asshats cannot Refi because they are SSSOOOOO underwater they should just "walk away".

The reason of this Bubble into US Tresuies is because no one is not loaning Asshats any money (House, Cars, Credit Card and Letters of credit) and everyone is afraid they will lose their money. How can you explain just getting 2.73% for 10 years? It's fear and nothing else.

When the Obama Administration takes over they will have some hard choices to make. Will they continue to bailout everyone and have the deficit go parabolic or will they put down the crack pipe and get things under control. If they don't the implosion in the Bond Market will be a sight to behold...

The What (But... But.. The Fed lowered rates right??)

Someday this war is gonna end...

Posted by: Return of The What at December 3, 2008 10:17 AM

"I've got the equity and I'm doing a refi. I guess that makes me an asshat."

Hold on! You need to get some comps Homeboy! Mayybe last month somewhere in your hood someone punched out at a suckass price and guess what? that is your "new" value and no Appriser or Underwriter will go over that amount. In fact you better hope your zip code is in a "Declining Area", they will cut 5% off the apprised price.

Yep most of you morons are toasty and crispy, Buh Buy...

The What

Someday this war is gonna end...

Posted by: Return of The What at December 3, 2008 10:22 AM

Yes, of course slopefarm. The comma is missing. But what if I was making reference to Orwell's "Animal Farm" but in this case Asshats played the characters on the "Slopefarm."

Maybe too deep for this early in the morning but we're playing Christmas music here at the MAB hedge fund and decorating the office. Can't wait for the What's response to that!!!!

My rate is 6.26% and my LTV when I bought it was 45% so I could easily refi but at 5.5% it still doesn't have a decent payback. I never refinanced in NYC. Is there away around paying the mortgage tax a second time??? Adam Dahill???

Posted by: daveinbedstuy at December 3, 2008 10:22 AM

"The reason of this Bubble into US Tresuies is because no one is not loaning Asshats any money"

No one is not loaning money? So everyone is loaning money?

Tresuies? Is that French for "very Swiss?

Posted by: Biff Champion at December 3, 2008 10:27 AM

Hey What...for the seventh time I ask you in what line of work you are currently employed?

"The reason of this Bubble into US Tresuies is because no one is not loaning Asshats any money" Pathetic.

Posted by: daveinbedstuy at December 3, 2008 10:29 AM

"Hey What...for the seventh time I ask you in what line of work you are currently employed?"

I'm guessing Customer Service Representative at the USPS.

Posted by: Biff Champion at December 3, 2008 10:32 AM

Or Amtrak. Or maybe MTA conductor.

Posted by: daveinbedstuy at December 3, 2008 10:34 AM

DIBS,

Adam will know the term, but it is something like "consolidation, [something, something], and spreader agreement." There are some costs, but it is less than the tax on a new mortgage.

what --

I've done my research and I am not worried about comps. Unless the appraiser starts using Phoenix or Las Vegas comps instead of the strong comps around the corner from me, I do not expect a problem.

Posted by: slopefarm at December 3, 2008 10:38 AM

No, there is no way around the mortgage recording tax. I also forgot that a refi might also entail paying a point or a percentage of a point along with various fees. I only refinanced because my rate was somewhere in the mid sevens which was pretty good at the time. When I bought my rate was 11 3/4 so for awhile I thought any mortgage rate in the single digits was pretty good.

Posted by: gowanusdog at December 3, 2008 10:38 AM

""The reason of this Bubble into US Tresuies is because no one is not loaning Asshats any money" Pathetic."

No that's not the truth!!! How many Money Market Funds, Pension Funds, School Boards, SWF, China, Japan, Opec Countries and Iceland got burned buying US Debt stupid!!! There is no trust in this system! Citibank is hiding 100's Billions in loses in Level 3 Assets off their books!!! Yeah OK, If you are trading without this information,, I feel very sorry for you.

The What

Someday this war is gonna end...

Posted by: Return of The What at December 3, 2008 10:40 AM

It seems many people are living in a Downtown Brooklyn bubble life. If you believe that falling prices and a high foreclosures outside of your Downtown Brooklyn bubble life will not eventually affect your property value then you really have no understand of economics and lack commonsense. Almost every zip code in Brooklyn has been labeled as a "declining market" in the lenders calculations. Which means they will subtract like a previous poster noted a 5-10% cushion lower on any potential loan.

Posted by: commonsense at December 3, 2008 10:44 AM

Do you even understand the difference between treasuries and other forms of "US Debt stupid" Treasuries have in fact, risen in price over the past two years.

STUPID, STUPID, STUPID

What do you do for a living What???

Posted by: daveinbedstuy at December 3, 2008 10:45 AM

"No that's not the truth!!!"

It's hard to win an argument while unknowingly using double negatives.

Posted by: Biff Champion at December 3, 2008 10:49 AM

It took 90 minutes for Daily News to 'steal' the Empire State Building

http://www.nydailynews.com/money/2008/12/02/2008-12-02_it_took_90_minutes_for_daily_news_to_ste.html

In one of the biggest heists in American history, the Daily News "stole" the $2 billion Empire State Building.
And it wasn't that hard.

The News swiped the 102-story Art Deco skyscraper by drawing up a batch of bogus documents, making a fake notary stamp and filing paperwork with the city to transfer the deed to the property.

Some of the information was laughable: Original "King Kong" star Fay Wray is listed as a witness and the notary shared a name with bank robber Willie Sutton.
The massive ripoff illustrates a gaping loophole in the city's system for recording deeds, mortgages and other transactions.

The loophole: The system - run by the office of the city register - doesn't require clerks to verify the information.

This ties into idiots like this

"I've done my research and I am not worried about comps. Unless the appraiser starts using Phoenix or Las Vegas comps instead of the strong comps around the corner from me, I do not expect a problem."

Are you an appriser? I guess not and Property Shark is not the best place to look for comps! I know you will argue this point so go on and good luck with that...

The What

Someday this war is gonna end..

Posted by: Return of The What at December 3, 2008 10:51 AM

"Do you even understand the difference between treasuries and other forms of "US Debt stupid" Treasuries have in fact, risen in price over the past two years."

That's right Asshat! The money is going in Treasuries and out of everything else! But that's OK you are drinking the Kool-Aid and the cyanide will kick-in very shortly...

The What

Someday this war is gonna end...

Posted by: Return of The What at December 3, 2008 10:55 AM

DIBS- send me an email. I'm not stepping into this arguement.

BTW- You don't pay MTG tax on the "old money" if you do a CEMA. Consolidation Extension Modification Agreement. See y post from yesterday.

Posted by: Adam Dahill at December 3, 2008 10:57 AM

*is someone going to correct his use of "appriser" at some point, or should we just let him continue to use it? It's kind of entertaining*

Posted by: Biff Champion at December 3, 2008 10:59 AM

I am looking to refi now as well (currently at 6.25 on a 30 year). I am certainly no expert at this stuff, but is it possible that some kind of gov. bailout program will make money super cheap in the future? I heard someone say this this morning on MSNBC or one of those shows - said to wait to refinance because money will be available (through TARP or a similar program) at around 4% in near future...

Posted by: TigerNYC at December 3, 2008 11:03 AM

Money will be cheaper in the future so long as you refi into something that Freddy and Fannie will buy, i.e., conforming or jumbo conforming....

If you fall outside their LTV or you need more than $729,750 then pray a lot.... It's going to take a while for the rest of the market to open up. There is no secondary market for mortgage backed securities except for the govt sponsored ones.. If these guys can't sell the mortgage, they have to hold it on their balance sheets which aint happening.

Posted by: Ozymandius at December 3, 2008 11:17 AM

We know prices are falling. After being told for the past two years that our coop woudl sell at no less than $1.2MM, we are now told that it is in the $900sK. That's 25% drop.

Posted by: BH76 at December 3, 2008 11:30 AM

BH78, how big is your place an dhas it been on the market all this time?

I'm really hoping to trade up sometime in the next few years. I'm okay with selling for less as long as I'm buying the classic seven of my dreams for less too.

Posted by: Ringo at December 3, 2008 12:05 PM

BH76 - a little reality check: you haven't had a 25% drop because you haven't sold your place.
$900sK is no more realistic than $1.2MM.
Everyone on this board seems to be in a What-fueled panic today, and yet many of the price chops, etc. we've seen are simply sellers backing off unrealistic prices. It's all fictional! The only thing that matters is the actual sales data.
And yes, those are sure to show a decline - but 25%? Perhaps, but most likely only on a place that had extremely weak fundamentals [location, construction, size, etc].

Posted by: parkedslope at December 3, 2008 12:09 PM

what -- wow, I've really progressed today, from asshat to homeboy to idiot. At least I can spell appraiser and treasury.

I can assure you, what, that I know how to tell good comps from bad. A good comp is typically a house within a block or two of mine, of similar construction and condition to mine, closing within the last few months. I am not an appraiser (feel free to copy my spelling) but I think I have a decent layman's sense of how they go about things. I keep good watch for comps in my area. I go to the open houses and track the closing prices.

I took out a HELOC more than a year ago, and the comps I found then matched those independently identified and used by the appraiser (there's that darn spelling again) in valuing my property. The comps I have identified this time run 20-40% higher than last time around, and even the old appraisal (the word shares a root with appraiser, which should give you another spelling clue) gives me a bit of a cushion. (And, commonsense, I imagine I will close before there are enough new comps showing a 30% or more drop in my neighborhood to ruin any valuation, so the eventual trickle down you predict won't hurt me unless I need to sell). I do my homework, what. And no, I am not worried that my comps are infected with deed fraud. I guess that makes me both an asshat and an idiot.

It remains a remote possibility that, despite the above, the appraisal will come in lower than I need. It happened to me once with WAMU when E-appraisit (see, there's always an "a" before the "i") insisted on using a bunch of tiny wrecks by the Gowanus and under the F train scaffolding as comps for my fully renovated house. Their loss was another bank's gain. I got better terms elsewhere and a proper appraisal (I figure you can spell it by now). The worst that will happen to me in the event of a low appraisal (. . . ) is that I will go on paying my mortgage and I will continue to enjoy my life. I don't have to take gleeful pleasure in the possible misfortunes of others to find joy and meaning in my own life. Again, I must be an idiot.

DIBS's general point is right. Smart people are trying to find ways to use the current climate to improve their their financial positions for the long haul. I would be curious as to what steps you have taken to improve yours and how you are faring. If your entire strategy in this economy consists of paying rent and taking uninformed potshots at others, your opinion isn't worth much. If you have shown some market savvy in your own life, you ought to post what you've been up to. It would improve your credibility around here.

Posted by: slopefarm at December 3, 2008 12:14 PM

wow - way to go slopefarm!

Posted by: parkedslope at December 3, 2008 12:21 PM

BH76 - who advised you on the past and present suggested asking price? Was it a broker from one of the major brokerages?

Posted by: ITM at December 3, 2008 12:22 PM

Slopefarm I hope you feel good because I do. Ask yourself this question. Can you afford to make mortgage payments when your "investment" is down 50%? Please you don't need to reply, you need to ask yourself. Time is equal to money and 5 years from now will be very different. So if you think poking at me will get you some satisfaction the go ahead have fun.

2009 our financial climate will be very very different and I hope you wont make any mistakes....

The What

Someday this war is gonna end...

Posted by: Return of The What at December 3, 2008 12:26 PM

Slopefarm, your patience and spelling are admirable!

Posted by: Schultz at December 3, 2008 12:31 PM

I'll reply to you, What: where do you get 50% in 5 years? From the hat in which you keep your ass?

Posted by: parkedslope at December 3, 2008 12:34 PM

"I'll reply to you, What: where do you get 50% in 5 years? From the hat in which you keep your ass?"

Well Numbnuts right here...

"We know prices are falling. After being told for the past two years that our coop woudl sell at no less than $1.2MM, we are now told that it is in the $900sK. That's 25% drop.

Posted by: BH76 at December 3, 2008 11:30 AM"

This is real world experience talking, not some shill connected to the Mutant Asset Bubble.

Greed and Denial are very bad things...

The What

Someday this war is gonna end...

Posted by: Return of The What at December 3, 2008 12:40 PM

Given the even tone of your last post, I will respond seriously and without (much) snark.

"Slopefarm I hope you feel good because I do."

I am glad.

"Can you afford to make mortgage payments when your "investment" is down 50%?"

Do you mean my investment in my house or my savings and investments in financial instruments? We meet our mortgage out of salaried income. If home value goes down from where it is, my mortgage won't change. So I expect to cover it. Financial investments are for a longer horizon.

"So if you think poking at me will get you some satisfaction the go ahead have fun."

Bit of a pot and kettle situation, don't you think? If you hadn't held me up as your Exhibit A of idiocy in this market, I would not have "poked" at you. There may be all kinds of stupidity out there in this climate. But if you want to make an example of me, you should expect that I will fight back.

2009 our financial climate will be very very different and I hope you wont make any mistakes....

I will try not to and wish the same for you.

Posted by: slopefarm at December 3, 2008 12:45 PM

Standard "refi incentive" is when the rate is about .5% below your current rate. Good rule of thumb to use so the breakeven is about five years in the future (depends a lot on your principle amount), given your refi costs. After five years, you start saving money.

I feel that one of the arguments in the article continues the misleading assumption that fed funds is correlated with the mortgage rate: "While mortgage rates haven't kept pace with the plummeting Fed Funds Rate". Of course they haven't (usually they move inversely)... you should be looking at the 10 year treasury note instead! This was posted on Bloomberg?

Posted by: justinm at December 3, 2008 12:50 PM

My apartment has not been on the market at all. Several brokers from major firms approached us. All I am saying is that it IS a 25% drop in what a broker would list at. And we have about 1500+ sq ft, (split) 2 bedrooms, 2 -1/2 baths, den (was a bedroom) and eat-in kitchen. The draw was that there are not many coops that size.

Posted by: BH76 at December 3, 2008 1:57 PM

What...please explain the math in your 12:40 post. How do you get from 25% to 50%?

Also, what do you do for a living?

Please try and answer at least one question in a straighforward, non-assinine manner.

Pathetic.

Posted by: daveinbedstuy at December 3, 2008 1:59 PM

"Also, what do you do for a living"

I'm a Broker.

Now for the bad news. Unemployment continues a upward trend.

ADP Says U.S. Companies Cut 250,000 Jobs in November (Update4)

http://www.bloomberg.com/apps/news?pid=20601087&sid=affocMz.qpqU&refer=home

"Dec. 3 (Bloomberg) -- Companies in the U.S. eliminated an estimated 250,000 jobs in November, the most since November 2001, a private report based on payroll data showed today."

December is the month where your get canned! The terminations are going out right now and this will have a effect on consumer spending.

"“I’m expecting to see a string of very weak employment reports, with unemployment rising to between 8 and 9 percent,” said Prakken, adding today’s figures signal the Labor Department will report November job losses exceeding 300,000."

8-99% unemployment going into "spring selling season" (Feb-Sept 2009) is very bad because it will put pressure on sellers to lower prices.

I don't understand how can the Asshats ignore the data coming in, GOD you think you're immune from everything!

The What

Someday this war is gonna end...

Posted by: Return of The What at December 3, 2008 2:16 PM

Hey Dave instead of bothering me you need to get back to work!

Fortress Halts Drawbridge Global Fund Withdrawals (Update1)

http://www.bloomberg.com/apps/news?pid=20601087&sid=asiamTLKlBS0&refer=home

"Dec. 3 (Bloomberg) -- Fortress Investment Group LLC, the private equity and asset manager, halted redemptions from its Drawbridge Global Macro hedge fund after investors asked to withdraw $3.51 billion by year-end."

"“It’s tough to tell if they’ve done anything wrong,” said Smith, who has an “in line” or neutral rating on the company. “The fund doesn’t look to be a terrible performer relative to the industry, so I’m not sure if this was based on performance alone. It’s more symptomatic of what you’re seeing in hedge funds across the board.”

Oh I forgot. I thought you was done with my "ill-informed ass"...

The What

Someday this war is gonna end...

Posted by: Return of The What at December 3, 2008 2:19 PM

We are not Fortress, neither are most other hedge funds. One soundbite does not necessarily describe the situation of all of the other funds.

But, as we know from the traditional broker-speak, they only tell you what they want you to hear!!! No wonder there's suck BS out of your mouth.

Posted by: daveinbedstuy at December 3, 2008 2:45 PM

We just got intraday pricing changes for the better!!!! Big swing on rates today.

adahill@approvedfunding.com

Posted by: Adam Dahill at December 3, 2008 3:23 PM

This is the main reason why US T-Bills (Blow me) is being used for a safe haven!!!!

No bids for Port Authority of NY/NJ bond offering shows credit crisis far from over

http://www.bloggingstocks.com/2008/12/03/no-bids-for-port-authority-of-ny-nj-bond-offering-shows-credit-c/print/

In another sign that the credit crunch has not disappeared, the Port Authority of New York and New Jersey received no bids from investment banks to underwrite a taxable note offering.

The Port Authority was trying to sell $300 million worth of three-year notes, backed by revenue streams, Bloomberg News reported. The Port Authority operates airports, river crossings, and certain transit systems in the New York metropolitan area and has a strong credit rating. The agency is also rebuilding the World Trade Center site, including the new Freedom Tower.

Economist David H. Wang was apoplectic about the failed offering. "This is unbelievable," Wang said. "It's a ridiculous situation, frankly, and something has to be done to free-up these credit markets. This is the financial equivalent of Warren Buffett not being able to get a $20 million loan."

State, cities, and other taxing districts have had trouble selling bonds through advertised bidding, after institutional investors pared-back their appetite for fixed-income securities -- and just about every other asset class -- as the financial crisis intensified in September. In tandem, investment banks have balked at bidding for certain debt, sensing insufficient client demand, Wang said.

"Credit conditions had improved somewhat up to the end of last month, but the Port Authority's inability to get a bid Wednesday demonstrates that more liquidity is needed," Wang said. "If necessary, the Federal Reserve or Treasury should step in to provide liquidity because there is no reason for deals like this to not be funded, from a risk standpoint."

Bond Market / Economic Analysis: Yet another disappointing -- and absurd -- data point for the credit markets. As economist Wang noted, the Port Authority has multiple, strong revenue streams that aren't going away anytime soon. It's credit rating is strong. In short, it's a very low risk investment. And yet, no bidders. If the Fed or Treasury does not step in first, perhaps the Port Authority will end up doing what Massachusetts did earlier this year, choosing to go the negotiated route for certain bond sales, when bids came in with an excessive/high interest rate for their bonds.

No one want US Debt RETARDS!!! Your Tax money (Money with you work for 3 month) is given to the banks (mostly interest free) and loan back you you at interest!!!

How retarded has America become???!! I called the iplosion of the Mutant Asset Bubble and STILL you have the Asshats trying to refute this, Unreal!!!!

2009 is coming and something wicked comes this way.....

The What

Someday the retards will wake up!

Posted by: Return of The What at December 3, 2008 8:05 PM

This is the main reason why US T-Bills (Blow me) is being used for a safe haven!!!!

No bids for Port Authority of NY/NJ bond offering shows credit crisis far from over

http://www.bloggingstocks.com/2008/12/03/no-bids-for-port-authority-of-ny-nj-bond-offering-shows-credit-c/print/

In another sign that the credit crunch has not disappeared, the Port Authority of New York and New Jersey received no bids from investment banks to underwrite a taxable note offering.

No one want US Debt RETARDS!!! Your Tax money (Money with you work for 3 month) is given to the banks (mostly interest free) and loan back you you at interest!!!

How retarded has America become???!! I called the implosion of the Mutant Asset Bubble and STILL you have the Asshats trying to refute this, Unreal!!!!

2009 is coming and something wicked comes this way.....

The What

Someday the retards will wake up!

Posted by: Return of The What at December 3, 2008 8:06 PM

A broker. What do you sell, What? Real Estate? Stocks? Bonds?

Regardless of the answer, you are the reason this MAB came about so you only have yourself to blame.

And don't tell me your sister got you your job.

Why don't you go lick Biff's balls clean like you said you wanted to. Doubt Biff would like that, but he might be kind and let you live out your secret desire.

Posted by: 11233 at December 3, 2008 8:51 PM

« Wednesday Links What's Up at the Sumner Avenue Armory? »

December 3, 2008

Refi Wave on the Way?

Trackback Pings

Comments

Post a comment

Get Brownstoner on your Mobile Phone

Latest Restaurant Additions