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By Jeff Lazerson
What’s up with mortgage rates? Jeff Lazerson of Mortgage Grader in Laguna Niguel gives us his take.
Rate news summary
From Freddie Mac’s weekly survey: The 30-year averaged 4.20%, up 3 basis points from last week. The 15-year fixed rate averaged 3.64%, up 2 basis points from last week.
The Mortgage Bankers Association reported a 7.3% percent decrease in loan application volume from the previous week.
Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $484,350 loan, last year’s payment was $108 higher than this week’s payment of $2,369.
What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages at zero points: A 15-year FHA (up to $431,250 in the Inland Empire, up to $484,350 in Los Angeles and Orange Counties) at 3.375%, a 30-year FHA at 3.50%, a 15-year conventional at 3.50%, a 30-year conventional at 4.0%, a 30-year FHA high-balance (from $484,351 to $726,525 in L.A. and Orange counties) at 3.875%, a 15-year conventional high-balance (also $484,351 to $726,525) at 3.75%, a 30-year conventional high-balance at 4.25%, a 15-year jumbo (over $726,525) at 4.0% and a 30-year jumbo at 4.50%.
What I think: When it comes to mortgage shopping, shouldn’t you have a right to competition?
What are the ramifications of not being able to shop around? No pricing competition for sure. And, maybe a credit denial when another lender might have approved you. In my experience, captive audiences tend to get inferior service. Neighborhood property values may also suffer.
The City of Laguna Woods has more than 6,000 senior co-op units that are largely restricted to one institutional lender. By comparison, the Leisure World senior community there has 6,547 condos without such a limitation.
According to Black Knight Inc., 940 of the 946 institutional mortgages made in the co-op section of Laguna Woods since 2009 were funded by National Cooperative Bank. That’s 99.4%. Clerical mistakes might explain the other six.
There were also 75 private party mortgages made (typically relatives with some dough) during that period.
With housing cooperatives, or co-ops, owners don’t own their own units. Instead, they purchase a share of a corporation, which in turn is the building’s owner. Therefore, the cooperative association can add additional restrictions on property owners that aren’t typically made when it comes to fee-simple parcels.
Orange County co-ops evolved in the 1950’s and 1960’s when apartment tenants wanted to own their own units, said Mike Hannah, real property division manager at the Orange County Assessor’s Office. Apartment owners found it easier to create co-ops rather than make the added effort to convert the apartment buildings to condos.
No grant deed is issued, Hannah said.
Six Laguna Woods real estate settlement service providers told me that National Cooperative Bank is the only approved co-op lender, and its been this way for 10 years.
What’s up with this one lender domination?
I’m not sure. After repeatedly asking for an interview, Jeffrey Parker, general manager of Laguna Woods Village (which manages all of Laguna Wood’s residential housing) finally agreed to a short phone interview with questions provided in advance. Ultimately, there was no interview and no answers provided about National Cooperative Bank, the co-op mortgage lender screening policy and the history of lender applications and lender outreach.
I recently compared National Cooperative Bank’s rate sheet for 30-year mortgages to a lender that was recently denied approval to finance co-op loans in Laguna Woods. National Cooperative Bank’s offer was 5.5%, while the other lender had the about the same cost at 4%.
That’s a crushing 1.5% percent higher rate for senior purchase and refinance shoppers.
“It really is a monopoly, which isn’t right,” said Robert Craig, broker and co-owner of Laguna Premier Realty, which handles about 300 or 25% of the annual Laguna Woods transactions — 40 percent of which are co-op transactions.
“Up to two years ago, the board allowed private financing,” Craig said. But not anymore.
“It sounds like a closed club,” said Laguna Niguel attorney W. Michael Hensley. There are potential monopolization or anti-trust claims that could be investigated.
The Department of Real Estate has received no actionable complaints against Laguna Woods, according to Jeff Oboyski, Assistant Commissioner of enforcement at the DRE. Any anti-trust questions would be better addressed to the California Attorney General, Oboyski wrote.
Jeff Lazerson - Mortgage Columnist since 2011