Mortgage Rate Spreads Widen

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I can't get off the phone with anyone I know without first having to hear about their particular mortgage story; Okay, maybe that's an exaggeration, but not that far off.

The first I heard this morning was about a mortgage broker in Annapolis who is so busy he can't answer all the phone calls coming in.

That is because more borrowers are rushing to refinance yet again, as mortgage rates dipped on bad news last week in the world economy and the Federal Reserve's announcement that it would get back into the business of buying mortgage backed securities from Fannie Mae and Freddie Mac.

It's not a sign that home buying is surging.

What was more interesting was the phone call with a producer at CNBC this afternoon, who told me that she is trying to refinance but getting wildly different rate offers from the different lenders she has contacted. This story jibed with a release from Lending Tree todaysaying that the spreads between the average and lowest mortgage interest rates are widening.

“We’re seeing about an eighty-four basis point difference between the average rate and lowest rates offered, the largest spread since LendingTree began tracking the data," says Doug Lebda, LendingTree's CEO. "That’s about a $125 difference in monthly mortgage payments on an average home loan, or $1,500 per year that borrowers could be saving on their mortgage payments."

Why are the spreads widening?

My guess is it's all about the credit quality, or lack thereof, of today's borrowers.

There are just a huge number of people who are unable to qualify for super low rates, so when lenders see really qualified borrowers, perhaps they're willing to offer them a better rate because that loan is so much more desirable. A borrower with good credit will find an increasingly competitive rate landscape.

There is plenty of evidence that overly tight mortgage underwriting is holding back a robust recovery in housing. Just look at the mortgage application volume to buy a home versus interest rates on the 30-year fixed. Despite rates dropping precipitously for the last six month and staying at near record loans, applications are holding relatively steady and even falling slightly.

And then there's the fact that nearly a third of home buyers in August were all-cash, and that share is in fact rising yet again. Mortgage industry types I talk to say the banks do want to lend, they're just forced into strict guidelines by Fannie, Freddie and the FHA that make their pool of potential customers smaller. I realize that's not great for the mortgage business, or, given what got us here in the first place, is it?

Questions? Comments? RealtyCheck@cnbc.comAnd follow me on Twitter @Diana_Olick