More Signs That Liquidity Is Returning To The Mortgage Markets

The worst may be over for home buyers, debt consolidators and other folks in need of mortgages.  That is, unless you're a Michigan fan -- in that case the worst may be ahead.

Author's note: I graduated from Penn State and currently live in Buckeye country. Showing this video is different from publically rooting for the Cubs or the White Sox and alienating half my audience, right?  Isn't it...?  Anyway...

A few interesting notes from last week and today make me think that some form of order is being restored to mortgage markets.

Good News For Mortgages #1: Pricing incentives on jumbo loans

A very large bank is offering pricing incentives for all jumbo, fixed, full documentation loans.  If you meet the criteria below, your rates won't be as bad you may have been told.

• Mortgage greater than $600,000 mortgage
• 30-year fixed mortgage
• Willing to prove income and asset with documentation

So far, I only know one bank that is making this discount available.  You may need to work with a broker to make sure you get it, or hope that you do your banking there.

Good News For  Mortgages #2: Large Alt-A lender places jumbo mortgages in secondary market

IndyMac sold $590 million in mortgage bonds to the markets for the first time since July 19.  About 40% of those bonds were rated "AAA", meaning the risk is deemed to as close to nil as possible.  Only government bonds are rated safer.

IndyMac's placed offerings were for jumbo mortgages.

Good News For Mortgages #3: Foreign National lending pricing continues to improve

Foreign National lending is a niche and one in which I like to work.  It's very encouraging to see that mortgage rates are still improving for this portfolio product.  Lending to a non-U.S. citizen can be a risky proposition for a bank because a foreign borrower has a different incentive system to pay a mortgage. 

If a U.S. citizen walks away on a mortgage from a U.S. bank, getting a loan from another bank in the future is a huge challenge.  For a foreign national, it just means limiting their real estate exposure to the other 193 countries in the world.

Because the risk premium is reducing for foreign nationals from Ireland, England, Spain or wherever, it suggests brighter skies for all mortgage borrowers.

UPDATE: 1:30 ET -- Additional placements reported in secondary mortgage market

From the Wall Street Journal Online, Thornburg Mortgage securitized approximately $1.4 billion in adjustable-rate mortgage loans over the past few days.  Liquidity, it appears, is returning.