Conforming & Jumbo Rates

Here’s something you don’t see very often.

Jumbo mortgages are usually 1/2% higher than the rates for conforming loans (under $417,000).  But with all the turbulence lately, jumbo mortgage rates are LOWER than a conforming rates at two of the big three banks:

Bank
Conforming Rate
APR
Jumbo Rate
APR
BofA
4.375%
4.473%
4.125%
4.205%
WFB
4.500%
4.673%
4.375%
4.489%
Chase
4.250%
4.324%
4.375%
4.412%

If the biggest banks in the country aren’t adjusting their jumbo rates upward at the same velocity as the market has popped the conforming rates, it suggests that they might think this turbulence is over-heated – perhaps like the weather!

Pocket Listings Undisclosed

The C.A.R. published more information on pocket listings, summarized here:

http://www.mercurynews.com/saratoga/ci_23531360/realtors-share-info-off-mls-listings

The real problem isn’t getting addressed.

The “pocket” realtors usually don’t tell the sellers they are going to pocket the listing – and if the sellers aren’t paying attention, they will never know.

Seller will see the sign pop up in the front yard, and think that their agent is doing the job.  Even if sellers verify that their home is listed in the MLS, they don’t know exactly what goes on behind the scenes unless they are really paying attention:

  • The listing agent can input the listing, but then shut down the showings.  Once they get an offer or two, some will start telling other agents that it’s too late, even though they haven’t accepted anything.
  • Listing agents can also throw away offers.  I submitted a cash offer that was $40,000 over the list price on an REO listing on the first day it hit the MLS.  The listing agent said that the bank wasn’t taking any more offers, which I told him was hard to believe.  Sure enough, 30 days later it closed for full price, and he represented the buyer too.
  • Brokers and managers promote in-house sales, and some pay bonuses too.  They have weekly office meetings where they discuss new listings to see if they can match sellers with buyers prior to MLS input.
  • You would think that the primary motivation is for the listing agent to represent the buyer too and get both commissions.  But you’ll see several of these completed where the buyer is represented by a different agent.  Either the listing agent is going to extreme measures to hide the facts, or it was a pre-arranged deal.

Some of these sales close for what appears to be top dollar, but you will never know for sure unless the property is exposed to the open market.

There is no enforcement of any laws, rules, or ethics – realtors are expected to treat their own clients honestly.  But you’d be surprised at how many of the highly successful and well-known realtors participate – and the president of the association of realtors confirmed it on our talk show.

It is old-school to look the other way, and by now it is deeply embedded throughout the industry as new agents see the old veterans rip off their own clients regularly in order to score a bigger payday.

Effects of Higher Rates

Hat tip to daytrip for sending in this article from money.cnn.com.

An excerpt:

San Diego real estate agent Jesse Zagorsky said one of his clients put in an offer on a home last Friday for $650,000, nearly $35,000 more than the home’s listing price.

Over the weekend, the buyer received a new rate that was more than a half a percentage point higher. They came back on Monday and reduced their offer by $15,000.

“The sellers said, ‘We’re very disappointed — but we’ll take it,'” said Zagorsky.

Cutting Appraisal Costs

From bloomberg.com:

http://www.bloomberg.com/news/2013-06-27/bank-of-america-said-to-send-property-reviews-to-india.html

bofa1Bank of America Corp. opened a unit in India to review home-valuation reports as it seeks to rebuild share in U.S. mortgages at a lower cost, said four people with knowledge of the move.

“One of the biggest problems in the mortgage business is all the paperwork involved, and how do you engineer it to reduce the bottlenecks,” said Bert Ely, an independent banking consultant in Alexandria, Virginia. “With offshoring, the potential for problems is always there, but it’s hard to be critical for trying to minimize costs.”

(more…)

More on Pockets

The state association of realtors (C.A.R.) attempts to address the pocket-listing issue in its latest edition of California Real Estate magazine:

http://www.onlinedigitalpubs.com/publication/?i=163273

They describe how agents think that pocket listings are OK, as long as the sellers sign the MLS-exclusion form.

But the exclusion form isn’t a permission slip for agents to ignore their fiduciary duty to expose the property to the open market, and go find their own buyer instead.  Unfortunately, no enforcement is in place, other than the Code of Ethics – so you better behave!

They also have an article on multiple offers, which concludes with this gem:

Or, as Krull puts it, “For buyers or sellers, I tell them that multiple offers are the reason they invented bourbon whiskey!”

We are a classy bunch.

The Effect of Higher Rates

Talking heads discussing the impact of higher rates – one being more ARMs:

The guest commentator said that we will lose 20% of the buyers if rates go over 5%, which sounded like a guess.  We don’t have to lose any buyers if they were just willing to look at smaller homes or a cheaper area.  It’s the buyer psychology and ego that will cause people to drop out.

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