December 23rd, 2012 11:04 PM by Eric Fang
Actually this is from an article on wsj.com.I don't know why wall street just figured thisout. This is not a secret from the mortgageindustry:
1)From the current MBS, the mortgage rate shouldbe around 2.875% for 30 yr fixed(by paying closingcost). But the borrowers could not get this ratesince the anks hold all the profits. Usually the spreadis about 0.5%, now it's between 1.3 and 1.6 points.
2)Banks does not hire new employee. They only hire temp works since they know that the businesswill be "dried up" if the rate goes up. That's why theturn around time is very long from some lenders(I have one loan not reviewed after sending to themfor about a month).
3)New regulation makes it hard for the loan underwriing.The overhead cost is higher. Usually one underwritercan review 190 loans, and now they can only review 60 loans. The rate is higher when they have higher overhead cost.
4)You will know from the following example:"If you open up a restaurant that seats 100 people, and you have 100 people out the door, your first thought is not to drop your prices,". Same for the lenders,they do not have any intension to drop the rate yet.