Posted on May 1st, 2008 in Mr Mortgage's Personal Opinions/Research
A couple of weeks ago I released an update on how bad I heard the new Agency-Jumbo programs were selling and how the overall interest in them was bleak. If they just would have asked me, I would have told them that in the past many years 30-yr fixed rate Jumbo loans never really sold well unless the rates got down to the lower 5% level because most could just not afford the payments or benefit from refinancing. Of course, my reports a few weeks ago were ridiculed by many saying ‘give it a chance’ and ‘it is so new, you don’t know what you are talking about’.
But even without my friends telling me how bad it really was, I knew they would not sell because I understand the math. Who in the world would want to refinance into a 7% Agency Jumbo when you have a nice, low-rate exotic right now and what percentage of the population can use it for a purchase?
From day one I have said “the new Agency Jumbos are for rich people to buy homes. The very same people who could have gone to any bank they wanted and obtained a loan”. Perhaps Agency rates are slightly lower than bank portfolio products, but not by much.
The simple fact is most people do not earn enough to qualify for these programs. With current rates on a 30-yr fixed, a household must earn roughly $100k to afford a loan amount of $417k. To fully take advantage of the new Conf-Jumbo programs at $729k, you must earn over $180k. Gimme a break…that is <3% of the population.
Guess what…the NY Times just came out repeating what I said weeks ago. Therein, lies the benefit of you reading ML-Implode and the Mr Mortgage blog as your first source of mortgage and housing related information. -Best, Mr Mortgage
NY TIMES STORY QUOTES –
“The program “is so much of a failure that it’s really unbelievable,” said Daniel M. Shlufman, president of the FCMC Mortgage Corporation in Clifton”
““We’re getting some benefit but not as much as I’d hoped,” said Representative Barney Frank”
” “It’s a complete joke,” said Jose Lemus, president of Brymus Capital”
“the interest rates on them remain prohibitively high, said prospective borrowers, like Nathan Menaged”
4/30 NY TIMES STORY LINK