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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: ild who wrote (14963)11/10/2003 2:43:02 PM
From: Mike da bearRead Replies (1) of 306849
 
I was wondering about the losses on serial refi's but then I came to this conclusion. The mortgagors are borrowing fed short term money at < 1%, charging you 5 to 6% for a 15 to 30yr mortgage. Therefore in 3 months of interest payments by the mortgagee you recoup the fees. The risk of course is if rates go up in that 3 months from when you gave out the loan to when you finally sell it. But with FNM/FRE hocus-pocus hedging maybe they claim to eliminate that risk.
So effectively they're using short term fed money but collecting 30yr loan rates.
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