December 30th, 2010

Rising mortgage rates and risky loan types



Percent I carefully document all of the mentions gets in the national media via the HSH in the News page on the blog (top-right corner). Today,’s VP Keith Gumbinger was quoted in two articles — one from and the other from the San Francisco Chronicle. Both articles provide borrowers with some essential information about the mortgage market as we head into 2011.

By now, most of you are aware that mortgage rates have risen somewhat substantially from their absolute lows. Let’s start by taking a look at the CNNMoney article titled “Kiss 4% mortgage rates goodbye.” While homebuyers and would-be refinancers are definitely sad to see 4 percent mortgage rates go, the experts agree, these rising rates may good for the economy:

Keith Gumbinger of HSH Associates, a provider of mortgage information said that the market reached a new plateau.

“I don’t think we’re going back to a 50-year low anytime soon without an economic collapse,” he said. “Rates will probably never revisit those levels.”

Gumbinger said that demand for homes may be tempered somewhat by the increased mortgage costs and so affect home prices a bit but the improving job picture and better consumer confidence matter much more.

“If the other factors are aligned,” he said, “interest rates are not a big thing.”

For many, the new year is all about resolutions and trying to avoid the mistakes they made the year before. The same can be said for mortgage borrowers. In 2011, mortgage borrowers will be trying to avoid the risky loan products that have put borrowers before them in deep financial holes.

Amy Fontinelle of Investopedia (article appears in the SF Chronicle) shares “5 risky mortgage types to avoid.” But as Gumbinger points out, risks involving mortgage products tend to be less about the product itself, and more about the borrower who applies for that specific product:

Because of the housing crisis, many of us have come to believe that certain types of mortgages are inherently risky. However, mortgage experts will tell you that a risky mortgage is really a loan product that is not matched with the repayment ability of the borrower.

Keith T. Gumbinger, Vice President of HSH Associates, agrees, saying, “believe it or not, the products available [around 2009] weren’t especially risky, for the right audience.” The problem was that certain mortgage types were being matched with the wrong borrowers, and lenders were telling borrowers, “you can always refinance.” This may have seemed true when home prices had been rising for years, but isn’t true when home values are declining.

For example, adjustable rate mortgages have gotten a somewhat bad reputation over the last few years. Yet just as our article explains, ARMs aren’t evil at all if they’re matched with the right borrower in the right situation.

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2 Responses to “Rising mortgage rates and risky loan types”

  1. Rising mortgage rates and risky loan types - HSH Financial Publishers (blog) Says: December 30th, 2010 at 3:23 pm

    [...] News Sources wrote an interesting post today onHere’s a quick excerpt [...]

  2. Tweets that mention Rising mortgage rates and risky loan types:  I carefully document all of the mentions gets in the nation... -- Says: December 31st, 2010 at 12:32 am

    [...] This post was mentioned on Twitter by HSH Associates. HSH Associates said: Rising mortgage rates and risky loan types:  I carefully document all of the mentions gets in the nation… [...]

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About the HSH Blog's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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