On May 28 I wrote Mortgage Market Locks Up. Ten year treasury yields started to soar and 30 year mortgages for good borrowers jumped a full point from 4.5% to 5.5%.



The question on my mind at the time was whether or not the mortgage action was a brief outlier. It wasn't. Things are now worse.



Two days ago Michael Becker, a Mortgage Consultant at Green Pastures Mortgage & Finance wrote:



Mish, I’ve attached two rate sheets to this e-mail. One shows the rates from May 21st, and the other from today June 5th (after a re-price). You can see on May 21st 4.625% was paying .375 points, and today 5.625% is paying .25 points.



So in a little over 2 weeks rates have jumped 1%. That is a huge jump.



When you add in the effect of the new Home Valuation Code of Conduct (HVCC) appraisal process, many loans originations will never close. This is because it is taking 15-25 days to get an appraisal back, and often those appraisals are coming 10-25% low. So locks expire or appraisals kill the deal, the latter possibly on purpose.



You are going to see the recovery in housing come to a complete halt. Trade up buying is already dead.



Michael Becker

"Mortgage rates jumped again to 5.75% and refis are frozen solid. The trade-up market is dead but some new houses are still moving .... for now. "

Fannie Mae 4.5% Mortgage Backed Securities

Two weeks ago when rates were hovering around 5.5% Mark Hanson commented "

Mortgage banks that made unhedged commitments at 4.25-4.75% are now in a position to lose substantial sums of money.

" Today it's an even bigger loss.

Treasury Yield Curve 2009-06-11

Interest Rate Buydowns Dead, ARMs Alive

Refis and trades up are not the only things dead. A couple weeks ago when rates started to spike, one could have paid a point or less and bought the rate down to 4.5-4.75%. Now, Jeff Bell informs me that the same buydown today might cost as many a 6 points! Wow!

Mortgage-Bond Yields Climb to New High Since Fed’s Buying Plan

Yields on Fannie Mae and Freddie Mac mortgage securities rose, setting a new high since the Federal Reserve announced plans to buy the bonds to drive down interest rates on new home loans and further thwarting the effort.



U.S. mortgage applications fell last week to the lowest level since February as a jump in borrowing costs discouraged refinancing and signaled that Fed Chairman Ben S. Bernanke’s bid to cap rates is stalling, according to Mortgage Bankers Association data released today.



The Fed initially said on Nov. 25 that it would buy as much as $500 billion of mortgage securities, before announcing in March that it would expand the program to as much as $1.25 trillion, as well as buy $300 billion of Treasuries.



Fed Is Out Of Control