I suspect – “suspect” being the operative word – that these rates are going to back up even more by the end of the year. My gut tells me that these rates are still 50 to 100 bps below where they need to be to generate a risk-adjusted return to the ultimate holder. Speaking for myself I wouldn’t dream of charging just 7.9% to a borrower with a 700 FICO and 20% Down (full-doc) prior to real estate prices firming up. But, hey, that’s just me. These whackos have been underpricing these mortgages for years. There’s no reason for them to get religion in one fell swoop. It’ll take some more time (and more losses) I suppose.
