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September 20, 2012

September 20, 2012 Mortgage Rates: Small, steady drops

by Rylan Stewart
Morro Bay (Harbor 1.9)

In our mortgage rate column yesterday, we speculated that rates could be lower rate now given current conditions. We pointed to two articles that discussed why rates haven’t been falling (and might not in the future). Here is the question at the center of the debate: will banks and lenders lower rates and pass along the savings to consumers when conditions suggest they could do so? There are all kinds of explanations as to why or why not, but here is something we haven’t thought of. From today’s Rob Chrisman blog post, reader Jessi B submitted this comment:

“Lenders are busy because the Fed is doing everything possible to keep rates low, but it’s not sheer volume keeping us busy. It’s also time spent interpreting & attempting to predict regulations and then implementing changes accordingly. Many of us would agree the regs are well-intentioned, but they are numerous, often confusing & it’s usually the borrower who is the most put out by their enforcement. Ensuring compliance is becoming increasingly costly, but the fear and risk of noncompliance could prove to be far more costly in the future.  Wholesale lenders fork out a lot of money to firms & attorneys to interpret regulations, and honestly gamble their livelihood in hopes that these firms are accurate. We risk hundred million dollar fines for ‘unintended actions’ characterized by legal terms with no legal precedence established.  Of course margins are good when the Fed Funds Rate is at or near zero; the interest rates on pools of loans has to be high enough to attract investors. That profit is largely spent on compliance and probably sacked away for potential fines and settlements, trying to earn enough interest to keep up with inflation.”

In other words, banks do have a higher profit margin, but they use this extra money to keep pace with new regulations. This fits into the “higher closing cost” due to government regulation narrative that we brought up in our article “Mortgage fees up 30 percent: government regulation to blame?

We shall see how the situation plays out. For now, we will keep watching the rates closely and keep you informed. Today, the cost of rates at the low end fell slightly, while the rest didn’t change.

 

30 year fixed –

September 19:

3.250 percent (3.271 percent APR)

Today:

3.250 percent (3.251 APR)

- 0.020 percent APR

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15 year fixed –

September 19:

2.750 percent (2.734 percent APR)

Today:

2.750 percent (2.734 percent APR)

No Change

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30 year High Balance -

September 19:

3.375 percent (3.400 percent APR)

Today:

3.375  percent (3.390 percent APR)

- 0.010 percent APR

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30 Year FHA -

September 19:

3.250 percent (4.097 percent APR)

Today:

3.250  percent (4.077 percent APR)

- 0.020 percent APR

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30 Year VA

September 19:

3.250 percent (3.251 percent APR)

Today:

3.250  percent (3.241 percent APR)

- 0.010 percent APR


APR is subject to increase and terms subject to change. APRs may very depending on loan details such as points, loan amount and loan-to-value, your credit, property type and occupancy. Closed rate and APR assume a rate and term refinance of a single family detached owner-occupied primary residence, loan amount $417,000 ($561,200 for high balance), and a minimum FICO score of 760. Situations vary based on applicant.

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Central Coast Lending is a California mortgage brokerage based in San Luis Obispo County. With offices in San Luis Obispo, Morro Bay, Paso Robles, and Arroyo Grande, Central Coast Lending is the top source for Central Coast mortgage, real estate, and home loan needs. To see why using a broker offers lower rates and superior service, click HERE. For a free, hassle-free online pre-qualification click HERE or call 805.543.LOAN to talk to one of our expert loan officers.

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