Realty Check

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It should come as no surprise to anyone that mortgage applications would surge last week, after the Fed announced it would buy GSE debt and mortgage-backed securities. Interest rates on the 30-year fixed dropped nearly a full percentage point.

Of course while the total applications index jumped 112 percent from the week before, it was largely driven by refis, up 203 percent versus the purchase index up just 38 percent.

So is it real? Depends on whom you talk to, and I’ve talked to a lot of folks. Maryland mortgage broker Craig Strent of Apex Home Loans tells me he put 35 loans in the pipeline last week, as opposed to about 5 the week before. He says he expects all of these to be accepted, because a good broker wouldn’t put an unqualified applicant into the process.

But qualifying these days is very tough. “Because of tighter underwriting guidelines the lower rates aren’t going to benefit everyone,” warns Greg McBride of Bankrate.com. “For example, you still need to bring down payment to the table, you still have to have good credit, and jumbo mortgage borrowers that have been paying outsized rates for over a year now, unfortunately, they’re not getting any relief from this.”

Then I read an interesting analysis from fellow blogger Mark Hanson, aka “Mr. Mortgage” “When rates drop through the floor in a short period of time, entire portfolios of loans that have been in process for up to a month shift from one bank to another, as loan officers and borrowers do what is necessary to take advantage of ‘today’s’ rate.”

So how many of these applications will really become loans? Hard to say, especially since online mortgage shopping is getting so popular. Guy Cecala of Inside Mortgage Finance estimates about 50 percent, but others say it’s more than that. Will the lower mortgage rates spur home buying? Perhaps, but with job losses towering over that small drop in rates, and qualification standards still very tough, 5.5 percent on a 30-year fixed is no silver bullet.

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