[quote=moneymaker]The smart ones don’t carry, but I believe many still do carry the prime ones.[/quote]
Chase still has many thousands of CA-originated “portfolio” Alt-A and prime mortgages which they “inherited” from WAMU who “inherited” them from Great Western Bank (and originated some themselves). I have one and is/was a “prime” borrower. Ditto for Downey Savings and a few others, including independents and some credit unions.
These mortgages are mostly indexed to the COFI and here in CA, our branch of the FHLBB (in SF) is known as the “11th District,” hence, in CA they are tied to the “11th Dist Cost of Funds Index.”
There is no reason to pay them off or refi because they have been adjusting downward monthly all by themselves in the last eight years or so and the index has cratered in recent years, so much so that the index plus the margin in some cases is less than the “floor payment” of 2.45% to to 2.75% (equal to the “margin”).
All were 30-yr mortgages and all the while they were/are fully amortizing.
Smart borrowers of these mtgs NEVER made less than the fully-amortized payment when they had the option to do so (the first 60 months of the loan). Hence, they have no deferred interest to pay and their payments never fluctuated very much.
In addition, they are “assumable” for a small fee to a qualified borrower.
It is unfortunate that programs exactly like I describe here do not exist anymore. There are variations of them available today but have backstops built into their annual caps (such as annually-adjusted level payments which cannot fluctuate up or down more than 7.5% in either direction when the loan is recast … every 12 mos). I suspect this was later added to “protect” stupid borrowers from themselves but the provision has been to the lender’s benefit, because a borrower on this program obviously has not been able to take advantage of the very lowest rates in recent years.
I think mortgage lending decisions should be made locally, by local lending institutions, with local loan officers and local appraisers employed by them and the mortgages kept in-house. This practice would have eliminated all the shenanigans which occurred during the “bubble years,” namely because they would have been loaning their own money and also servicing the loan.
