Brokers critique mortgage mini-boom story

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Reader reaction was generally favorable to a front-page Times story Friday on home loan applications increasing as average interest rates for 30-year mortgages fell below 5%. But a couple of brokers complained that the article omitted some crucial points.

The story quoted a Mortgage Bankers Assn. report that the national average for a 30-year fixed-rate home loan had dropped to 4.97% for the week that ended Sept. 18. Loan applications had jumped 13% from the previous week and were up 50% from late June, the trade group said.

Mike Gianelli, a veteran mortgage broker in Torrance, said such broad averages are meaningless without additional details, especially how many ‘points’ borrowers paid to get the loans. (Points are upfront fees charged by lenders, with each representing 1% of the loan value. By paying more points, borrowers can ‘buy down’ the rate on a loan.)

‘If you really want to get some buzz with your next column, why don’t you write that rates dip below 4%?’ Gianelli wrote. ‘That’s available too -- if you pay a ton of points, put 20% down, accept an impound account and have FICO [credit] scores above 780.’

Fair enough. So here, for the record, are more details on the average loan the mortgage bankers’ group was describing: The borrowers put 20% down and typically paid 1.12 points, including the origination fee.

Laguna Niguel loan broker Jeff Lazerson said his company had been doing sub-5% mortgages for months -- for the fortunate few who can even get a loan these days. He said it was a ‘gaping hole’ for the story not to have mentioned the fact that the mortgage system ‘is still completely dysfunctional.’

‘If you have fair or poor credit, there is nothing for you, regardless of income and asset qualifying,’ Lazerson said.

‘Perhaps 30% of homes are upside down. Unemployment is, what, 12% in California? Applications may be up, but the lenders are still minimalist when it comes to loan fundings. Their thinking is, today’s fundings are tomorrow’s foreclosures.’

So much for trying to detect rays of hope on the mortgage front, eh?

-- E. Scott Reckard