There was little change in mortgage rates this week as prominent bankers answered congressional questions about the origins of the financial crisis.
The benchmark 30-year fixed-rate mortgage fell 3 basis points, to 5.23 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week’s survey had an average total of 0.47 discount and origination points. One year ago, the mortgage index was 5.28 percent; four weeks ago, it was 5.13 percent.
The benchmark 15-year fixed-rate mortgage fell 5 basis points, to 4.62 percent. The benchmark 5/1 adjustable-rate mortgage fell 6 basis points, to 4.68 percent.
The usual holiday doldrums ended last week, as borrowers began filing mortgage applications again. According to the Mortgage Bankers Association, 71.5 percent of those applicants were homeowners who wanted to refinance, and only 4 percent of applicants asked for adjustable-rate mortgages.
Results of Bankrate.com’s Jan. 13, 2010, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
|30-year fixed||15-year fixed||5-year ARM|
|This week’s rate:||5.23%||4.62%||4.68%|
|Change from last week:||-0.03||-0.05||-0.06|
|Change from last week:||-$3.24||-$4.24||-$5.95|
This week, Congress reached back into history in an effort to understand what led to the financial crisis. In 1932, the Pecora Commission (named after the panel’s chief counsel, Ferdinand Pecora) investigated the causes of the 1929 stock market crash. This year’s Financial Crisis Inquiry Commission is modeled partly upon its Depression-era forerunner.
The panel conducted its first hearing Wednesday, and invited the heads of Goldman Sachs, JPMorgan Chase, Morgan Stanley and Bank of America. All of those companies except Bank of America bankrolled subprime and nontraditional mortgage lenders during the boom, allowing the housing bubble to inflate. (Bank of America didn’t underwrite subprime mortgages after 2001, but it later bought Countrywide under heavy government pressure. Countrywide was a major subprime lender.)
Lloyd Blankfein, CEO of Goldman Sachs, defended his company by saying that it never got into the direct mortgage lending business. However, Goldman Sachs securitized subprime loans from some of the biggest lenders. Goldman was the biggest creditor of New Century Financial, the first major subprime lender to go belly-up, in February 2007.
Jamie Dimon, CEO of JPMorgan Chase, said, “We made mistakes in the mortgage business,” but added that the company and its subprime affiliates didn’t underwrite pay-option ARMs. John Mack, chairman of Morgan Stanley, didn’t address that company’s prominent role in subprime lending, and instead talked about the financial panic of late 2008.
None of the financial executives could be described as being self-critical in their testimony to the panel, but Blankfein came closest. He said the financial crisis “was a failure of risk management less than problems with incentives … I think it was a failure of competence.”
Later, Blankfein acknowledged that Goldman didn’t scrutinize individual loans that it securitized to make sure they were up to snuff, because “sophisticated investors” were eager to buy them.