It's a shame that a great idea can sometimes be dragged down by others.

Yes, I'm still touting Jumbo Mortgage Rates.

Here's a synopsis of what happened.

• Tuesday, May 6th: Fannie announces to that they are going to enable lower interest rates for Jumbo Mortgages - pushing them closer to Conforming Loan Rates.
• Wednesday, May 7th: Fannie did just that. Jumbo Mortgage Rates dropped significantly.
• Thursday, May 8th: Lenders are reporting, as expected, an increase in Jumbo Mortgage Locks.

However, upon closer inspection, those Lenders are reporting today that the loans that were locked were also a "bit higher than the prevailing interest rate".

Let me decipher that for you

(I'm using all hypothetical numbers and rates just for clarification)

You applied for a loan a couple of weeks ago with "Loan Officer Larry". At that time let's say Larry quoted you a real interest rate for your Jumbo Mortgage at 6.75%

Yesterday Larry called you. He was out of breath, excited, and could hardly contain himself. He told you he locked your loan not at 6.75%, not at 6.5%, but all the way down to the unbelievable rate of 6.0%!

Can you believe it? That Larry, what a great guy!

Here's what really happened

Rates did drop. They dropped significantly. But they dropped much more than Larry told you. What Loan Officer Larry did was give you a partial break and pocket the rest in the form of Yield Spread Premium. That's a fancy word for putting cash in his pocket.

According to the lenders, Larry made a lot of money yesterday.

How do you feel about Larry now? Did you get LOL'd? Sorry about that.