Wow. What a bunch of freaking crooks creating a new loan category. So much for rasing the limit from $417

Wow. What a bunch of freaking crooks creating a new loan category. So much for rasing the limit from $417

That was fully expected. From an MBS trader point of view, large loans behave quite differently from small loans (they have different prepayment characteristics), so the bids in the secondary market reflect that. Therefore, one ends up with 3 categories of MBS:

– under $417K: no credit risk (covered by GSEs), low prepayment risk

– between $417K and $730K: no credit risk (still covered by GSEs), but high prepayment risk

– above $730K: both credit risk and prepayment risk

Prices (and, therefore, rates) simply reflect this reality.

That was fully expected. From an MBS trader point of view, large loans behave quite differently from small loans (they have different prepayment characteristics), so the bids in the secondary market reflect that. Therefore, one ends up with 3 categories of MBS:

– under $417K: no credit risk (covered by GSEs), low prepayment risk

– between $417K and $730K: no credit risk (still covered by GSEs), but high prepayment risk

– above $730K: both credit risk and prepayment risk

Prices (and, therefore, rates) simply reflect this reality.

That was fully expected. From an MBS trader point of view, large loans behave quite differently from small loans (they have different prepayment characteristics), so the bids in the secondary market reflect that. Therefore, one ends up with 3 categories of MBS:

– under $417K: no credit risk (covered by GSEs), low prepayment risk

– between $417K and $730K: no credit risk (still covered by GSEs), but high prepayment risk

– above $730K: both credit risk and prepayment risk

Prices (and, therefore, rates) simply reflect this reality.

Daniel,
You seem like the man to ask a question I have.

Relative to other factors how much does simple supply and demand affect mortgage rates? We have recession and very little buying. Most conservative people who have mortgages are locked into pretty good terms. On the other hand there is supposedly a credit crunch which may just be more of what davelj(pigg regular) called a ” shitty asset crisis” or something like that.

The idea kind of floats around here that rates going up will drive prices down further I am wondering if demand for mortgage money as houses fall and when the economic outlook improves doesn’t have a counter effect to that notion in a relative way of course, dependent on other variables perhaps?

Daniel,
You seem like the man to ask a question I have.

Relative to other factors how much does simple supply and demand affect mortgage rates? We have recession and very little buying. Most conservative people who have mortgages are locked into pretty good terms. On the other hand there is supposedly a credit crunch which may just be more of what davelj(pigg regular) called a ” shitty asset crisis” or something like that.

The idea kind of floats around here that rates going up will drive prices down further I am wondering if demand for mortgage money as houses fall and when the economic outlook improves doesn’t have a counter effect to that notion in a relative way of course, dependent on other variables perhaps?