Nation’s Top Wholesale Mortgage Lender Launches New Line of Adjustable-Rate Mortgages

Posted on May 13th, 2021

Declaring that ARMs are back, United Wholesale Mortgage (UWM) has just rolled out a new line of adjustable-rate mortgages for its mortgage broker partners.

The new offering from the nation’s largest wholesale mortgage lender includes a 5-, 7-, and 10-year ARM to flank the usual fixed-rate options, such as the very popular 30-year fixed and the shorter-term 15-year fixed.

What makes these loans interesting is the fact that they come with significantly better pricing than fixed-rate mortgages currently available with other lenders.

And that might be enough to change the ARM argument, which has been decidedly dour for years now thanks to record low fixed mortgage rates.

How Long Will You Actually Keep Your Home Loan?

  • Something like 90% of purchase mortgages are 30-year fixed loans
  • And roughly 80% of all mortgages including refinances are 30-year fixed loans
  • Yet less than 10% of borrowers actually keep their home loan for more than seven years
  • This means the bulk of homeowners with a mortgage are overpaying for the perceived safety of a fixed interest rate

UWM aptly points out that fewer than 10% of borrowers stay in the same mortgage for more than seven years, yet something like 80% of mortgagors hold 30-year fixed mortgages.

In other words, a large majority are paying too much for their home loan, yet never actually receiving the benefit of an interest rate that is fixed for the life of the loan.

And because many adjustable-rate mortgages come with a lengthy initial fixed-rate period, many of these homeowners could actually benefit from an ARM without ever worrying about a rate adjustment.

UWM notes that pricing on its 7-year ARM could be anywhere from 50 to 75 basis points (.50%-0.75%) better than a 30-year fixed loan.

For example, if a 30-year fixed is priced at 3%, it might be possible to get a 7-year ARM for 2.25%.

If we’re talking about a $350,000 loan amount, that’s a payment difference of about $140 per month and roughly $18,000 in interest saved over 84 months.

That’s the draw of an ARM – to save you money while also providing a lower monthly payment while you hold the thing.

And if you get rid of it during the fixed-rate period, which in the case of these loans is 5, 7, or 10 years, you essentially win.

Are ARMs Set to Get Popular Again?

  • Adjustable-rate mortgages have mostly been a home loan choice for the very rich lately
  • The ARM share was just 3.8% of total mortgage applications last week per the MBA
  • That may begin to change as mortgage rates rise and lenders embrace ARMs again
  • UWM has been a leader in mortgage innovation so this could be a sign of things to come in the industry

Chances are ARMs will gain in popularity as fixed rates begin to rise, assuming that happens over the next few years.

They may appeal to both new home buyers who want a lower interest rate, and existing homeowners who want to tap equity via a cash out refinance.

The adjustable-rate mortgage was super popular during the housing boom in the early 2000s, though they often featured extra-risky options like interest-only payments and negative amortization.

While an ARM is still a risk to some degree, given you don’t really know where interest rates will be at first adjustment, those who do have a clear vision can benefit, as illustrated above.

UWM’s suite of ARMs are all tied to the newly-launched Secured Overnight Financing Rate, otherwise known as SOFR, the LIBOR’s replacement.

Additionally, they all adjust every six months once they become adjustable, meaning they are 5/6, 7/6, and 10/6 ARMs.

This can be slightly more stressful than an annually adjusting ARM, such as the popular 5/1 ARM or 7/1 ARM.

The good news is the cap at each adjustment is just 1%, meaning the interest rate can’t increase by any more than one percent every six months.

And remember, the first adjustments don’t start for 60, 84, or 120 months, respectively, which as UWM noted, shouldn’t affect many homeowners who either sell their homes or refinance before that time.

The new ARMs are available on primary, second, and investment properties, for purchases, rate and term refinances, and cash out refis.

They are conventional loans (backed by Fannie Mae or Freddie Mac) and a minimum FICO score of 640 is required, with a maximum loan-to-value (LTV) ratio of 95% is permitted.

UWM has been a bit of a vanguard in the mortgage space, so there’s a good chance other mortgage lenders will soon follow suit and begin offering ARMs at a discount to their fixed-rate counterparts.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

What Is a Mortgagee? Hint: It’s Not a Typo

Are You a Mortgagee or Mortgagor?

It’s mortgage Q&A time! Today’s question: “What is a mortgagee?”

No, it’s not a typo. I didn’t leave an extra “e” on the word mortgage by mistake, though it may appear that way.

Despite its striking appearance, it’s actually a completely different word, somehow, simply with the mere addition of the letter E.

Don’t ask me how or why, I don’t claim to be an expert in word origins.

Seems like a good way to confuse a lot of people though, and it has probably been successful in that department for years now.

You can blame the British English language for that, or maybe American English.

Anyway, let’s stop beating up on the English language and define the darn thing, shall we.

A “mortgagee” is the entity that originates (makes) and sometimes holds the mortgage, otherwise known as the bank or the mortgage lender.

They lend money so individuals like you and I can purchase real estate without draining our bank accounts.

It could also be your loan servicer, the entity that sends you a mortgage bill each month, and perhaps an escrow analysis each year if your loan has impounds.

The mortgagee extends financing to the “mortgagor,” who is the homeowner or borrower in the transaction.

So if you’re reading this and you aren’t a bank, you are the mortgagor. It’s as simple as that.

Another way to remember this rather confusing word jumble; Who is the mortgagee? Not me!!

Mortgagor Rhymes with Borrower, Kind Of

mortgagor

  • Here’s a handy way to remember the word mortgagor
  • It kind of rhymes with the word borrower…
  • Or even the word homeowner, which is also accurate if you hold a mortgage on your property

I was trying to think of a good association so homeowners can remember which one they are, instead of having to look it up every time they come across the word.

I believe I came up with a semi-decent, not great one. Mortgagor rhymes with borrower, kind of. Right? Not really, but they look and end similar, no?

Anyway, the real property (real estate) acts as collateral for the mortgage, and the mortgagee obtains a security interest in exchange for providing financing (a home loan) to the mortgagor.

If the mortgagor doesn’t make their mortgage payments as agreed, the mortgagee has the right to take possession of the property in question, typically through a process we’ve all at least heard of called foreclosure.

Assuming that happens, the property can eventually be sold by the mortgage lender to a third party to pay off any attached liens, or mortgages.

So if you’re still not sure, you are probably the mortgagor, also known as the homeowner with a mortgage. And your lender is the mortgagee. Yippee!

What makes this particular issue even more confusing is that it’s the other way around when it comes to related words like renters and landlords.

Yep, for some reason a landlord is known as a “lessor,” whereas the renter/tenant is known as the “lessee.” In other words, it’s the exact opposite for renters than it is for homeowners.

But I suppose it makes sense that both landlord and mortgage borrower are property owners.

What About a Mortgagee Clause?

mortgagee clause

  • An important document you may come across when dealing with homeowners insurance
  • Stipulates who the lender (mortgagee) is in the event there is damage to the subject property
  • Protects the lender’s interest if/when an insurance claim is filed
  • Since they are often the majority owner of the property

You may have also heard the term “mortgagee clause” when going through the home loan process.

It refers to a document that protects the lender’s interest in the property in the event of any damage or loss.

It contains important information about the mortgagee/lender, including name, address, etc. so the homeowners insurance company knows exactly who has ownership in the event of a claim.

Remember, while you are technically the homeowner, the bank probably still has quite a bit of exposure to your property if you put down a small down payment.

For example, if you come in with just a 3% down payment, and the bank grants you a mortgage for 97% of the home’s value, they are a lot more exposed than you are.

This is why hazard insurance is required when you take out a mortgage, to protect the lender if something bad happens to the property.

Conversely, if you buy a home with cash, as opposed to taking advantage of the low mortgage rates on offer, it’s your choice to insure it or not.

But more than likely, you’ll want insurance coverage on your property regardless.

In summary:

Mortgagee: Bank or mortgage lender
Mortgagor: Borrower/homeowner (probably you!)

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

Fannie Mae Increasing Max DTI to 50%, Upping LTVs for ARMs

Last updated on July 17th, 2018

There’s been a lot of talk lately about mortgage lenders easing credit standards as refinance volume wanes and purchase activity remains constrained by limited inventory.

Because more and more new entrants (many so-called disruptors) have joined the fray, and there’s a smaller pool of eligible mortgage borrowers, risk appetite is expected to rise in coming months.

In fact, a Fannie Mae survey released yesterday found that the share of lenders expecting to ease credit standards over the next quarter hit new all-time highs.

Fannie Mae Increasing Max DTI to 50%

  • Fannie is making it easier for borrowers
  • To get approved for a mortgage with a high DTI ratio
  • Via their automated underwriting system
  • Which should usher in more of these types of loans

First off, we’ve got Fannie Mae’s Desktop Underwriter (DU) Version 10.1 release slated for the weekend of July 29th.

The biggest change is that this version of DU will allow debt-to-income ratios as high as 50%, up from 45% currently.

For the record, you can get approved at the moment with a DTI as high as 50%, but Fannie requires additional compensating factors to support a DTI ratio between 45-50%, such as lots of assets and an excellent credit score.

With this release, that 50% DTI will be good to go because the DU risk assessment will automatically consider “a broad range of loan characteristics and borrower credit factors.”

In plain English, this means it’ll be easier to get approved for a mortgage with a high DTI ratio, and because Fannie is greenlighting it, banks and lenders will likely ease up and follow suit, ditching overlays in the process.

ARM LTVs Going Up

  • They’re also increasing allowable LTVs on ARMs
  • Pushing the max LTV to 95% for adjustable-rate mortgages
  • Which aligns with the fixed-rate mortgage rule
  • Similar increases will apply to multi-unit properties and investment properties

Along with the DTI change, Fannie will soon permit loan-to-value ratios on adjustable-rate mortgages up to 95%. That means you only need 5% equity to get an ARM.

The rule will align LTVs on ARMs with those on fixed-rate mortgages, which are deemed lower risk, across all transaction, occupancy, and property types.

For example, someone buying a two-unit owner-occupied property is currently limited to an LTV of 75% if they elect to use an ARM to finance it.

When DU 10.1 is rolled out, this max LTV will increase to 85%, so they’ll only need to put 15% down instead of 25%.

A four-unit owner-occupied property will see the max LTV rise from 65% to 75%.

Similar increases will be seen in a variety of scenarios, meaning more borrowers will be able to, well, borrow more.

I’m assuming the 97% LTV offering from Fannie will still only permit a fixed-rate mortgage, for obvious reasons.

It’ll also get easier to borrow if you’re self-employed, with Fannie’s newest version of DU more likely to require just one year of personal and business tax returns.

That should mean less headaches and paperwork, and potentially more approvals if two years of documentation don’t paint your business in as favorable a light.

Finally, Fannie will ease up on borrowers with disputed credit tradelines so that if DU approves the file, no more action will be necessary.

Less Redundancy, More Approved Loans

  • It looks like Fannie wants to make the home loan process easier
  • With less overlap and actual reliance on the automated system
  • Instead of still requiring paperwork on top of an automated decision
  • Hopefully this will speed up things up and reduce the paperwork burden on mortgages

In summary, it sounds like Fannie will be relying more upon its computer (algorithm) to do the underwriting going forward so that redundant documentation and scrutiny won’t be required.

If you think about it, why should you have to further explain stuff that’s already been taken into account and factored into the automated approval?

These changes, along with other recent enhancements, like more forgiving student loan payment calculations, should make it easier for more folks to get mortgages.

And it could just be the tip of the iceberg. We already discussed the idea of 10% down being the new normal, and the coming removal of tax liens and civil judgments from credit reports might bring even more borrowers into the game.

For the record, Fannie performed an analysis to see what approvals would look like without those derogatory accounts on credit reports and found that the impact would be “small,” and said lenders can remain confident in DU.

Still, cleaner credit reports might result in hundreds of thousands of newly-eligible mortgage borrowers out there.

And altogether, these underwriting changes may affect millions of prospective buyers and those looking to refinance.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

Medical Collections Killing Refinance Frenzy?

medical

Everyone knows mortgage rates have plummeted in recent weeks, but what does that actually mean for those looking to refinance?

With tough guidelines in place and flagging property values, it could equate to a lot of spinning wheels and paperwork.

And one mortgage banker is arguing that erroneous medical collections showing up on potential borrowers’ credit reports are throwing another wrench in the deal.

“The tragedy is that the collection accounts, even those that have been paid in full, are lowering these individuals’ credit scores, often to the point that they either can’t qualify for a loan, or will have to pay higher interest rates if they do,” said Rodney Anderson of Rodney Anderson Lending Services.

According to Anderson, 45 percent of the 1,701 loan applications his company received between June and September involved borrowers with at least one medical collection.

And these collections can kill an applicant’s credit score (whether legitimate or not), even if the remainder of their credit profile is sound, eliminating the possibility of any mortgage rate relief.

Anderson noted that medical billing is “notoriously error-prone,” and as a result, has launched a petition to lessen the severity of medical collection-related credit dings, which he says can lower credit scores more than 100 points.

The petition essentially calls for a new federal law mandating the removal of a medical collection from a borrower’s credit report within 30 days of it being paid or settled, instead of it kicking around for seven years.

Medical billing is certainly an area that needs to be looked at, but the whole credit reporting industry is in need of some serious revamping, and could easily be blamed for a share of the mess were in now.

(photo: paulkeleher)

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

Bank of America Refinancing Under Making Home Affordable Program

Last updated on February 2nd, 2018

bankofamericarates

Bank of America said today it has begun processing refinance applications under the Treasury’s “Making Home Affordable” program, with nearly 200,000 customers contacting the company to determine eligibility.

“Combined with historically low interest rates, this program has generated significant interest from borrowers seeking the benefit of lower mortgage payments,” said Barbara Desoer, president of Bank of America Mortgage, Home Equity and Insurance Services, in a release.

“We are proud to be one of the first lenders to take loans from application to closing under the Treasury’s plan, providing the opportunity for more Americans to save money on their monthly mortgage payments and supporting efforts to stabilize the nation’s housing market.”

However, the bank seems to be focused on specific applicants, namely those with Bank of America or Countrywide serviced loans and no mortgage insurance on their current loans.

The bank said additional customers will be served “as systems become operational.”

In the next two weeks, the company expects to begin offering trial loan modifications under the Treasury Department’s “Home Affordable Modification” program, and has extended its foreclosure moratorium on potentially eligible loans until April 30.

Bank of America, since snatching up former top mortgage lender Countrywide Financial, services roughly one out of five mortgages in the United States.

I’ve been told by my friends in the industry that Bank of America has been offering mortgage rates much lower than the competition, effectively pricing out them out in the process.

The company is also planning to roll out a jumbo mortgage program focused on loan amounts between $730,000 and $1.5 million, with 30-year fixed mortgage rates beginning in the upper five-percent range.

Apparently there are profits to be made in mortgage.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

Wells Fargo Hired 5,000 Employees to Handle Mortgage Workload

Last updated on August 9th, 2013

opportunity

San Francisco-based bank and mortgage lender Wells Fargo reportedly hired 5,000 employees to handle its ever-increasing mortgage workload, according to Bloomberg.

Wells Fargo CFO Howard Atkins said in an interview that the bank increased staff over the past couple of months to process its record haul of mortgage applications, which made it the top mortgage lender over Bank of America/Countrywide.

The company originated $101 billion in first mortgages during the first quarter, more than double the $50 billion in the fourth quarter and nearly half the $230 billion for all of 2008.

The correspondent/wholesale channel contributed $49 billion to that, practically double the levels seen in earlier quarters; home equity lines and loans, however, totaled just $1 billion.

All those applications led to the best mortgage origination quarter since 2003, contributing to the company’s record $3.05 billion net income in the first quarter.

But what happens once mortgage rates rise and refinance dries up, pushing volume back to more historical levels?

Sure it’s great that the bank took on thousands looking for work, but it seems to be only temporary employment.

And it’s wonderful that they’re upping their fulfillment areas, but what about staff in the company’s loss mitigation department?

“We remain focused on proactively identifying problem credits, moving them to nonperforming status and recording the loss content in a timely manner,” said Chief Credit Officer Mike Loughlin in a release.

“We’ve increased and will continue to increase staffing in our workout and collection organizations to ensure these troubled borrowers receive the attention and help they need.”

I doubt they’ve hired many employees in their workout and collection units, as they seem pretty focused on bringing in all those new mortgages with the low mortgage rates.

Shares of Wells Fargo were up $1.24, or 6.59%, to $20.05 in midday trading on Wall Street.

(photo: jasontester)

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

Obama Urges Americans to Refinance Mortgages

refinance now

During a Housing Refinance Roundtable today, President Obama urged homeowners to take advantage of the record low mortgage rates currently on offer.

He made the remarks while sitting with a number of families who were able to refinance their mortgages after struggling with unaffordable mortgage payments (what about all those who are too far underwater or hold jumbo loans?).

“What you’ve seen now is rates are as low as they’ve been since 1971,” Obama said. “Three-quarters of the American people get their mortgages through a Fannie Mae-Freddie Mac qualified loan.”

“And as a consequence of us being able to reduce the interest rates that are available, we have now seen some extraordinary jumps in the rate of mortgage refinancings.”

“We’ve already seen a substantial jump — 88 percent increase in refinancings over the last month. We’ve seen Fannie Mae refinance $77 billion of mortgages in March, which is their highest volume in one month since 2003. And rates on 30-year mortgages have dropped to an all-time low of 4.78 percent.”

He noted that the families who accompanied him at the event were able to achieve more sustainable monthly mortgage payments via refinancing, and estimated that the average family could save $1,600 to $2,000 a year if they took advantage of the offers currently on the table.

“So the main message that we want to send today is, there are 7 to 9 million people across the country who right now could be taking advantage of lower mortgage rates.”

He added that the Administration is also working to implement some “additional phases of the program,” such as its loan modification program for “responsible homeowners who made their payments” but fell behind because of job loss, sickness, etc.

“The main message we want to send today is, is that the programs that have been put in place can help responsible folks who have been making their payments, who are not looking for a handout, but this allows them make some changes that will leave money in their pockets and leave them more secure in their homes.”

Obama plugged the MakingHomeAffordable.gov website several times throughout his address to ensure homeowners actually knew where to go to get help.

He also warned against loan modification scams, urging homeowners to steer clear of companies that demand money for services upfront.

I’m somewhat curious if we’re helping the banks/mortgage lenders more than the homeowners here because private label mortgages seem to be at the root of the problem, not Fannie/Freddie loans.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

Now You Can Get a 30-Year Fixed at 3.25%

low rate

We all know mortgage rates are low, but this is seemingly ridiculous.

The New Hampshire Housing Finance Authority is currently offering a mortgage rate as low as 3.25% on a 30-year fixed-rate mortgage.

And that’s with as little as 3.5% down (FHA loan). Of course, there are several strings attached. There are income and purchase price limits in place, and the property must qualify for the financing.

Only certain homes in certain areas are eligible, and underwriting is probably pretty darn strict, but it still illustrates how low interest rates have fallen in recent weeks and months.

But is the rate really as low as it appears?

While the NHHFA (possibly a made-up acronym) is pitching the 3.25% rate, the APR is actually significantly higher. In fact, it’s 4.158%.

What gives?

Well, there are a number of fees, including two mortgage points that must be paid to get that low rate.  The par rate is actually 3.50%.

So it’s not necessarily as low as it seems. But the APR does factor in private mortgage insurance, and likely everything else that you must pay at closing.

There’s a problem with APR though – it varies so much from lender to lender that it’s not always possible to get an apples-to-apples comparison when mortgage quote shopping.

[Mortgage rate vs. APR]

For instance, over at the Zillow Mortgage Marketplace, the best advertised quote delivered today was a rate of 3.875% on a 30-year fixed.

The APR was 4.018%, lower than the 3.25% rate offered by the NHHFA.

Why? Well, for one the mortgage discount fee is only 1.50%. And the loan-to-value ratio is 80%, meaning the borrower must come in with a 20% down payment.

The New Hampshire deal only requires a 3.5% down payment, and borrowers can even receive a grant so long as they bring in at least one percent of their own funds.

[Why are mortgage rates different?]

The fees on the Zillow quote are probably also smaller/fewer, which drives down the APR, but who knows exactly what’s being included.

Lowest Rate Not Always the Best Deal

So the takeaway here is that the lowest mortgage rate doesn’t always equate to the best deal.

And it’s only a matter of time before someone comes out with a 30-year fixed at 2.99% or something similarly outrageous.

Just make sure it’s actually a good deal for you. What I mean by that is that the super low rate actually benefits you.

If you don’t plan to pay off your mortgage or stay in your home long term, buying down an interest rate to a psychological level doesn’t make a lot of sense.

Sure, you can brag to your neighbors that you’ve got the lowest rate in history, but you may have wasted money obtaining it.

And a slightly higher rate may make more sense if your money is better invested somewhere other than housing, somewhere more liquid.

Finally, when you’re buying down your interest rate, be sure to find a certain point where the cost and the associated rate make the most sense (do the math!).

You probably won’t want to pay an extra or point or two to lower your rate just a .125 or a .25 of a point for bragging rights alone.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

Home Builders: Housing ‘Highly Affordable’

reduced

Housing affordability remained near its highest level on record for the sixth consecutive quarter, according to the latest survey from the National Association of Home Builders.

The National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) indicated that 72.3 percent of all new and existing homes sold during the second quarter were affordable to families earning the national median income of $64,400.

That’s up slightly from the first quarter and just shy of the record-high 72.5 percent seen in the first quarter of 2009.

Before 2009, the affordability index rarely topped 67 percent, and had never reached the 70 percent-mark.

But record low mortgage rates and falling home prices have opened the door for more buyers, less the tighter underwriting environment.

Kinda makes you wonder why no one is interested in buying a home these days – maybe affordability isn’t the driver.

After all, a ton of buyers pre-mortgage crisis couldn’t even afford to make their mortgage payments in the conventional sense, so they opted for mortgage programs with teaser rates like the option arm.

Perhaps they were more interested in the thought of home price appreciation, as opposed to simply living in a home.

Syracuse, NY Most Affordable Housing Market

The most affordable major housing market in the country was Syracuse, NY, pushing Indianapolis-Carmel, IN off the top spot, which it held for almost five years.

Nearly all (97.2%) of the homes sold there were affordable to households earning the median family income of $64,300.

Detroit, Youngstown, and Buffalo also made the list of the most affordable metros.

Meanwhile, the New York-White Plains-Wayne, NY-NJ area continued to be the least affordable major housing market during the second quarter, with just 19.9 percent of all homes sold deemed affordable to those earning the median income of $65,600.

Los Angeles, the Bay area, and Honolulu continued to linger at the bottom of the affordability scale during the quarter as well.

Read more: What mortgage can I afford on my salary?

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

A 30-Year Fixed in the 3% Range? Maybe, But Does Anyone Care?

Last updated on December 19th, 2017

party

The good news about the continued economic uncertainty is interest rates keep slipping lower and lower.

The basic principle with regard to mortgage rates is that bad economic news pushes them down, and good news makes them rise. Fairly simple.

And so over the past few weeks, mortgage rates have been inching back toward what could be new all-time record lows.

In fact, there’s even talk of the popular 30-year fixed-rate mortgage falling into the 3% range, which is certainly uncharted territory. Hooray! Pop the champagne, right?

Right now you can get your hands on a 30-year fixed in the high 3% range if you pay several mortgage discount points at closing, but clearly not everyone has the money nor wants to buy down their interest rate.

It just doesn’t make sense given all the “uncertainty.” And yes, I only quoted that to emphasize

Still, rates are so low that some fence sitters may be looking to buy real estate again, especially first-time home buyers with no existing home equity concerns.

Current Homeowners Trapped

You see, those who already own a home are kind of trapped – despite mortgage rates marching to new all-time lows, property values are also sinking.

So these people can’t put their home on the market unless they’ve got some serious home equity.

And the only people who do are those who purchased before the housing boom and didn’t elect to take a cash-out refinance or home equity line of credit at any point during the housing run-up.

Unfortunately, this is a select few, so the unprecedented mortgage rates aren’t having their desired effect.

This is evidenced by the lackluster mortgage application and pending home sale figures that continue to be reported each month.

Strange that no one seems to care about mortgage rates this low, isn’t it? But is it a lack of care, or more a lack of confidence in housing and the economy at large?

Housing No Longer the Ultimate Investment

It seems nobody is interested in buying a home, despite being able to actually afford one now, probably because they won’t be able to “flip it” and “make millions” overnight.

That was the draw of purchasing a home during the run-up and subsequent bubble. To get rich. That mentality seems to have vanished, so who cares about low mortgage rates?

Sure, your monthly mortgage payment will be super low and you’ll be able to buy a larger home, but without kick-butt appreciation, what’s the point? Why not just rent?

Perhaps that’s the mentality now – it’s not a sure thing anymore, so why take the risk and go through the trouble?

Interestingly, low mortgage rates can matter a lot more than home prices. I wrote about the two previously.

The scary part though is if prospective home buyers aren’t biting now, who will be once mortgage rates rise?

And what will happen to home prices if rates rise to more sustainable, natural levels? Will they too need to plummet to garner any interest?

Perhaps I’m being overly cynical, but you’d think there would be more excitement about mortgage rates this low.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com