mortgage

Rates tumble for 6th week

Mortgage rates fell for the sixth week in a row, to a level last seen in the spring.

The benchmark 30-year fixed-rate mortgage fell 3 basis points to 5.22 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 0.34 discount and origination points. One year ago, the mortgage index was 6.2 percent; four weeks ago, it was 5.4 percent.

The benchmark 15-year fixed-rate mortgage fell 4 basis points to 4.6 percent. The benchmark 5/1 adjustable-rate mortgage fell 3 basis points to 4.66 percent.

The 30-year fixed has been below 6 percent all year in Bankate's weekly survey. It rose as high as 5.95 percent in early June, not long after hovering at 5.2 percent or lower for four weeks in a row in March and April. There was a minor refinancing boomlet back then, and another one now.

Weekly national mortgage survey
Results of Bankrate.com's Oct. 7, 2009, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
30-year fixed15-year fixed5-year ARM
This week's rate:5.22%4.6%4.66%
Change from last week:-0.03-0.04-0.03
Monthly payment:$908.07$1,270.69$851.79
Change from last week:-$3.07-$3.39-$2.97

According to the Mortgage Bankers Association, loan applications spiked 16.4 percent last week, led by a surge in refinance applications. There was a big increase in purchase applications, too, as people took advantage of the first-time homebuyer tax credit, which expires Nov. 30. Even so, two-thirds of applicants were homeowners wanting to refinance.

Low rates drive activity

Low rates were the impetus, says Bob Walters, chief economist for Quicken Loans. "In the first weeks of autumn, mortgage rates have surprisingly inched down to levels we haven't seen since May, encouraging people to get off the bench and into the homeownership game," he says.

But is the game about to end? Paul Descloux, publisher of Mortgage Maxx, an independent index of mortgage activity, writes in his weekly analysis: "The now-intensifying foreclosure crisis, fueled by surging unemployment, may push housing past a tipping point where the only green shoots will be along the foundations of abandoned homes."

Descloux points out that 6 percent to 7 percent of mortgages have been refinanced so far this year, which is much below expectations. When the first-time homebuyer tax credit expires and rates rise, people won't exactly have to take a number and wait in line to file a mortgage application.

Closings take longer now

That's probably just as well, because it's taking longer to close on a mortgage. At the end of July, the Federal Reserve imposed new rules that require waiting periods before a loan can close. The regulation compels a waiting period of seven business days between the time the initial loan disclosure documents are sent and the transaction can be closed.

But that's not all. If the lender's good faith estimate was off, and the loan's annual percentage rate changes by one-eighth of a percentage point or more (in either direction), then the lender has to send out more disclosures -- and another three-day waiting period begins before the loan can be closed.

The idea was to protect borrowers from lenders surprising them with last-minute changes in rate or fees. But some borrowers end up paying fees to extend their rate locks past 30 days in case of delays.

"The intention is good, but if all of a sudden it means that people now have to do 45-day rate locks to meet the law, well, that's great -- you just spent the money you saved," says Dick Lepre, senior loan consultant for Residential Pacific Mortgage in San Francisco.

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