Misha

Four Points on the 'Great Short Trade'

For whatever this worth, I will add another observation to Derenthal’s comments. I just closed on a refinance on my house with Countrywide (BAC now; I got 4.5% with one point; it would have been ~4.7-4.8% if I loch=ked last Friday and probably even higher today – check the rates). This is my 8th mortgage so I have some experience with this. For the first time ever, I was asked to bring a last week’s pay stub to the closing (they had my ~6 week old stub on file but are clearly concerned if I still have a job). For the first time ever, they actually generated 3 different appraisals of my house and asked me to pay for them upfront (my guess, too many houses appraise below what can be refinanced and they do not want to take a hit on cost of appraisals). At closing, I asked my mortgage broker, who manages the local Countrywide branch, about the business. The % of applications that actually proceed to closing was ~40% just a couple of months ago, and is ~60% now as they learned to better prescreen the applicants. On pending closings there are no move-up mortgages in a pipeline. All mortgages are either first time buyers (“They don’t know how lucky they are,” he said) or special situations. They have difficulty qualifying even good buyers. For example, they have a couple that sold their old house a couple of years ago and then spend some time renting and deciding where they want to move. They now want to buy here, sit on a ton of cash for a down payment, but my mortgage broker is concerned that with husband self employed (can use his for qualification!?), the wive’s income may not be enough to qualify. The day before my closing, he closed on a mortgage in a highly desirable, close to skiing brand new house that was originally listed for ~1.5M but was sold as bank owned for ~650K.