Brian Brady- Jumbo Mortgage Capital/San Diego

"Wall Street, can you read me?"

"Yeah, go ahead DC, we read you five by five"

"We have a problem."

Wall Street may be overconfident of a debt-ceiling hike deal and that overconfidence is priced into the market.

In Washington, it can be tough to understand why New York is so sure of itself. While Wall Street is brimming with confidence that a deal will be struck, many Washington officials say the dynamics of this stalemate are different from any other they have encountered. And that means New York traders could be in for a big surprise in early August.

With less than two weeks to go before the Aug. 2 deadline, no deficit-reduction plan offered by the Senate or House has gained a significant amount of momentum. The House GOP’s “cut, cap and balance” proposal is dead on arrival in the Senate, which has yet to move its own budget.

This means that a failure to extend the federal borrowing limit will catch markets by surprise; we could conceivably see La Jolla jumbo mortgage rates rise 1-1.5% overnight, in early August.

I've worked with mortgage-backed securities traders and I'm amazed at the huge gamble they're taking. The culture of government bailouts is so pervasive in the financial community that the bankers are willing to ignore this risk.

Could La Jolla jumbo mortgage rates go lower? I suppose they could but there is clear and present risk right now. If you CAN, lock your mortgage rate to avoid this risk.

Jumbo mortgage rates for July 21, 2011

Remember when I told you that jumbo mortgage capital, for La Jolla homebuyers, was becoming more readily available? I spent the better part of the first and second quarters, searching for jumbo mortgage purchasers in the secondary mortgage market. That project was rewarded in late May:

I thought I was the lone capitalist voice in a market dominated by Wall Street welfare queens. Naturally, Randazzo's work inspired me to action. Yesterday, World Wide Credit Corporation organized a division to provide "capitalist solutions" to the California mortgage market and we named it Jumbo Mortgage Capital. We've identified non-traditional lending sources, normally eschewed by most local lenders, and can offer the following products to California home buyers and owners:

• fixed-term ARMs, for loan amounts up to $4,000,000 (fixed terms range from 3 years to 10 years)
• 30-year fixed-rate loans for loan amounts up to $4,000,000
• stated-income jumbo mortgage loans for loan amounts up to $2,000,000
• stand-alone Home Equity Lines of Credit up to $500,000
• jumbo mortgage solutions, with just 10% down payment, up to $1,000,000

I talked about this in the Wall Street Journal last week. While most of the people interviewed were expressing tenuous fear, about the government pull back, I explained that private money sources were ready, willing, and able to lend:

Investors and some academics say the government needs to shrink its footprint if private markets are to re-emerge, and that big loans for pricey homes are a reasonable place to start. "Credit unions, small banks, and hedge funds are all eager to buy these loans," said Brian Brady, a mortgage banker at World Wide Credit Corp. in San Diego.

While I was right about the trend, I was wrong about the size; the jumbo mortgage product is explosion is taking off with the intensity of the final space shuttle. In today's Wall Street Journal, there is evidence that supports the claim I made, in the same publication, just ten days ago. Yet, even the Wall Street Journal is focused on the agency-jumbo products rather than the capitalist-inspired private lenders.

We are making jumbo mortgage loans in La Jolla. Should you need to borrrow up to $4,000,000, call me and I'll try to help you find the money.

Why are jumbo mortgage loans so much more expensive today than they were last Monday? Greece struck a deal with the European Union to get emergency loans. That action reassured golbal financial markets that a Greece default would be stayed. Money flowed into equities and out of the safe haven of US Government securities. Mortgage bond investors demanded higher yields from mortgage originators which was passed onto the retial borrower.

In which direction will jumbo mortgage rates head this summer? I believe rates will be stable through Labor Day with some erratic movements upwards. The federal Reserve bank has halted its quantitative easing plan. While this should pressure jumbo mortgage rates higher, Greece is but the first of many sovereign default crises bubbling beneath the surface of a calm Mediterranean Sea. I expect those threats of crises will hold the upwards pressure in check.

If you can, lock a jumbo mortgage rate under 5%. If higher than 5% is offered, you might pause to read what's happening in Europe. Another one of these crises could afford you that rate under 5%.

Jumbo Mortgage Rate Indications, as of June 6, 2011:

• 5/1 ARM----------4.000%/4.210% APR
• 7/1 ARM----------4.375%/4.571%APR
• 10/1 ARM---------4.625%/4.807%APR
• 30 Yr Fix----------5.125%?5.557%APR

Jumbo mortgage rates quoted are for loan amounts from $700,000 to $2,000,000. 1% origination fee applicable. Credit, down payment, and income restrictions apply. Not all will qualify. Equal Opportunity Lender. NMLS ID 339261

Get a customized rate quote here

Apply online for a mortgage here.

I sure did. I sold a property, back in 2003, and wanted it closed in in thirty days. I was uprooting my family to move to a different state and knew I was going to need cash quickly. At that time, I was "real estate rich", cash-poor, and jonesin' to buy in my new area. I knew I'd need to move some real estate quickly so I "bribed" the buyer's agent with a higher than normal co-brokerage fee.

I had three "non-negotiable points":

1. I wouldn't accept anything less than the listed price
2. The escrow had to close within 30 days,
3. All contingencies had to be removed within 10 calendar days.

I listed the property on a Thursday and asked my agent to hold it open on Saturday and Sunday. The property was vacant and I had just repainted it so I knew it would show well. I priced it competitively so I expected offers quickly.

Monday morning, my agent presented me four offers: two were below the listed price and two were above it. What stood out about the one I accepted (which was not the highest offer), was that the offer waived the appraisal contingency. This was 2003 and lenders were using automatic valuation models (AVMs) for home buyers with at least 20% down payment.

I accepted the buyer's offer. Now, all I had to do was to get through the contingency period. Typically, the buyer's agent submits a request for repairs for the seller to accept, reject, or amend. I received that request on day nine.

I was kind of sweating a bit at this point. The request for repairs was a laundry list of items, which I calculated to be 1% of the sales price. I relied on my "bribe" to make this deal happen quickly and denied the request for repairs. I basically said " take the deal or walk"

The contingency was removed and the seller closed a week early. I don't know if my "bribe" to the buyer's agent did it but my house sold...early and for the price I wanted.

Pretty icky, huh? At this point, you might think I'm a real sleaze ball for "bribing" the buyer's agent with a bonus but, I want you to ask yourself these questions:

• What was my role in the transaction? What was my job?
  
• Who was supposed to be protecting the buyer's interests?
• Would you care if your agent earned more than the average co-brokerage fee if you got the home for the price you wanted?
• How could you prevent such a thing from happening to you?

This is a real estate website so expect a bunch of real estate agents to comment that my post offends them. Some might even say that this practice NEVER happens and threaten that I did something illegal or unethical (I didn't; I was selling a property and I represented nobody).

A few might just answer the question in your mind right now (which is, most likely, the fourth question I asked you to ask yourself). Those are the smart agents.

How do I know you ask those questions? Consumers like you ask me them all of the time. After all, I've been involved in over 600 real estate transactions. Here is an example of questions I get. Read what (sandycat) asks right here:

Does a buyer's agent have to disclose that they would receive a bonus if they sell a particular house? We signed our contract and now our agent said that she just found out that she gets a bonus for selling that house to us. Had we known that the seller was giving a bonus to the agent, we feel as if we could have had more negotiating power. Are there any disclosure laws about this??

This San Antonio agent (kevcrawford) answered her question reasonably:

99% of the time, the bonus being offered is out of the listing agent's commission, not from the seller, so you probably wouldn't have had any more negotiation power. I know that if I have a listing in a slow area that's priced correctly and we're just not getting many showings because the area is slow, I'll tack on a 4% buyer agent commission or bonus and I'll cut my take way down. This is a pretty standard practice in most places.

As far as disclosure, every state is different. I have a feeling that you were happy with the house and felt you got a good deal until you found out your agent got a bonus. You wouldn't have bought the house otherwise. Enjoy your new house and thank your agent for finding you a great home for a deal that you obviously were happy with, because you closed.

At least I thought it was a reasonable explanation, until I read the customer's follow-up comment:

Yes, we feel like we got a good deal. But like I said before, if we would have known that the seller is willing to dish out all this extra money, we could have negotiated a little more aggressively. We are talking large sums of money, OUR money. Also, with a house transaction, we would expect full disclosure. I understand that real estate people buy and sell houses all the time, but we are average people who, at most, will buy and sell a few times in our lifetime. We rely on the experience and honesty of you guys to help us through this sometimes confusing and legalistic process.

Do I feel like we should get a piece of the bonus? No. I say good for her and Merry Christmas for getting a bonus right before the holiday. But we felt as if we were sideswiped and it doesn't feel right.

Ugh, that's not a big vote of confidence for her agent. Let's see if she relaxed. Nope, it gnawed at her:

I'm totally not upset that she got a bonus. And she didn't lead us to this house, we asked to see it. I really have to believe that she didn't know until later. I really think in the end we got a good deal, I guess it felt a little "shady".

Finally, we see that the customer's husband tells all the agents that incentives DO matter:

There is still another perspective and this goes to all realtors. It is about the fact when a professional is to represent the buyer's side and professional advice is requested. Any extra incentive will have some impact on the agents motivation

You want to know as a buyer if there is a special motivation to sell that specific property. Especially when the agent is asked about specific matters you want to trust in their judgement. By not disclosing the extra bonus there is a lot of room for second guessing...

...Honesty still matters and once the deal turns sour it's a lose lose situation for everybody. For the realtor side is about losing recommendations or even worse, reputation.

Smart agents will address this and will advise you to negotiate the fee you expect your buyer's agent to receive before you look at homes. As I've always said, most real estate agents are good and honest business people. Most loan agents are, too. The compensation structure for loan agents and the compensation structure for real estate agents, is broken, though. The REALLY good agents will acknowledge this and want to help you answer all those nagging questions, about the appearance of impropriety, before, during, and after the transaction.

Hire one of them.

You might have noticed that REBA (La Jolla Real Estate Brokers Association) just got a new affilate member. That's right, America's #1 Mortgage Broker is focused on jumbo mortgage capital and what better place to market those loans than "The Jewel" of Southern California; La Jolla. Those of you who know me from five years ago, on Active Rain, know that we tend to focus on loan markets when few other lenders will. I call this contrarian marketing and it's served me well over the years.

In 2006 we were talking about "hard money" loans because everyone else had abandoned that market. Our challenge was that Southern California homeowners were losing equity faster than pop stars were losing their privacy. While we still have a steady private lending practice, we shifted our efforts to draw upon our experience as an accomplished VA lender.

Our timing couldn't have been better. VA loan limits increased as housing prices were dropping and active-duty servicemembers' compensation was rising. That marketing effot certainly saved our business and we thrived in 2009 and 2010, focused on VA loans. We used Active Rain to help bolster our position as the San Diego VA Lender in the search engines.

Today, we see hedge funds, credit unions, portfolio lenders, and established players nibbling around the edges of jumbo mortgage loans. As conforming loan limits decrease, this Fall, we want to position ourselves as THE non-depository lender of choice for La Jolla real estate agents. After months of hunting and courting, we have more than a half-dozen capital sources to fund loans up to $4,000,000.

Active Rain is THE place to practice long-tail internet real estate marketing so expect to see more consitent information here. The strength this website has in the search engine results, combined with the connectivity to local real estate professionals, makes Active Rain an important part of any real estate agent's marketing plan. You can expect more webinars, conference calls, in-person social events and training sessions, and one-on-one meetings.

I appreciate the opportunity to answer any questions about our services and financing solutions. While we strictly serve California now, I have made tremendous connections, throughout my five years on Active Rain, and hope to help whomever needs my advice.

Photo: Presidential candidate Mitt Romney's La Jolla home, from Huffington Post.