It Figures

Why Are Mortgage Rates So High?

You are overlooking another, unspoken, lender risk factor. Most in the incoming Congress and Administration have made it clear they believe it is good policy to allow courts to retroactively re-write mortgage contracts at the expense of lenders and in favor of borrowers when debtors become unable/unwilling to meet their obligations.

Should these re-writes become standard, all historic loss and recovery rules of thumb will become useless, and lender recoveries-in-default will decline. The way lenders protect themselves against this possibility is to further widen spreads against their cost of funds, to accommodate likely larger future loss/incident costs.

"Helping" today's struggling borrowers this way raises mortgage rates for all future borrowers. When policy changes increase lender losses, alert lenders - the only kind left- naturally build in fatter cushions to protect themselves and their profitability.