NYT's Take on the SpikePosted on Monday, August 13th, 2007 at 5:40am.
A commenter posted a link to this Sunday NY Times story, which echoes a bit here in MB.
It's mostly an analysis of the scare in the mortgage markets last week, and the possible impact on housing – particularly the higher end.
The "real person" at the center of the story, illustrating the problem of spiking jumbo loan rates, is an investment banker (never named) trying last week to buy a home on Long Island for $1.5m.
The guy's rate was quoted at 8% and jumped to 13% three days later when he was ready to move on the loan. Needless to say he didn't take that offer:
In the end, he was able to get a mortgage with a lower interest rate, but it will adjust in five years, possibly to a much higher level.Here's a guess – that 8% quote was for a 30-yr. fixed, but he blanched at all the new fixed rates for jumbos and went for the adjustable instead. A move both desperate and bullish.
We get a parade of gloomy quotes:
NY-area mortgage broker: “There is a lot of fear in the markets. When there is fear, people have a tendency to overreact.”Some of that talk, we're the first to say, sounds like a postmortem before the body's cold. We can't be sure what is in store. It ain't over.
NYT: "There have been sudden changes in the mortgage market before, but this one may be both more severe and more damaging than those in the past."
SF mortage broker: "In California, [the rate spike] has shut down the purchase market. It has shut down the refi market.”
NYT: "[A] problem that began with Wall Street excesses that provided easy credit to borrowers — and made it possible for people to pay more for homes — has now turned around and severely damaged the very housing market that it helped for so long."
So we'll see what the next week brings. The rate spike may be temporary. New rules for loans seem to be the silent, deadly problem.
MBC is aware of just one recent MB escrow to fail thus far – since the news of the spike – but it was on a lot sale, not a high-end purchase. We're watching for new escrows as well as cancellations.
comments powered by Disqus