Wa Mu and the "Power of Yes"..what the heck?

I have had the opportunity to talk to several people about the changes in lending in the last 3 years and 2004 to 2007 seem like a bizarro fantasy land. Consider for a moment the following actual loans that were done:

Purchasing a duplex as a non owner occupied investment with a 80/20 ( 100% finanacing ) combo. Buyer put $1000 in earnest money and seller covered the buyers' closing costs. All for the seller paid closing costs. It's the buyer's money coming to the table loan or not. May as well spend it where it garners the biggest benefit.

No doc loan, AKA the infamous NINJA loan ( No income No Job, No Assets ) to 95% financing. No mortgage insurance on a primary residence. Borrower provided their name, SS #, address and phone number and allowed a credit report to be pulled. These were really No No's. I still don't think these are such a bad idea for the right borrower, just not everybody.

Cash Out Refinance of a single family investment property to 85% of the appraised value...6 months after purchase. The property "appreciated" 22%.. Things that make you go "hmmmm".

Sounds weird that these could get done. Sounds even stranger that when these loans were available there was always another lender out there that was going to go one better than the competition. Countrywide's reps would say, " send it and we will get it done ", and they did. WaMu and their subprime side Long Beach Mortgage took the cake though. I don't WaMu ever saw a loan they couldn't sell. All of us in Real Estate were drinking from the fire hose. Now we get to share a garden hose.

Rates .. up, up and away!

Off we go! As predicited by many ( me included ) rates have begun their run up after the Fed has now exited the MBS market. In November of 2008 when the program was announced 30 year interest rates dropped 1% in a day. While rates didn't jump back up 1% on Wednesday when the program ended there had been indications that they would move up.

Now after 18 months of rates at or below 5% all of us wroking with residential buyers now get to be grief counselors when a borrower hears that they won't be getting the same rate as their neighbor who purchased or refinanced recently. If a borrower didn't lock their rate last Monday it's too late.

I expect that we will see an upward trend to somewhere in the 5.5% to 5.75% range over the next week or so. Already in the last 10 days the 10 year treasury is up .306% and climbing. Rememebr while the 10 year is not the only marker for 30 year mortgage rates it is one that allows for a "quick and dirty" check of where rates could be going.