Thrifts Slash Prices in Heated Battle for Adjustable-Rate Loans

By Saft, James H. | American Banker, May 17, 1994 | Go to article overview

Thrifts Slash Prices in Heated Battle for Adjustable-Rate Loans


Saft, James H., American Banker


A price war has broken out in adjustable-rate mortgages - and thrifts are doing most of the shooting.

More than a dozen thrifts are touting one-year adjustables with start rates below 4%, according to a recent survey by HSH Associates, and scores are offering rates below 5%. That compares With a fixed-rate market that is pricing loans at around 8.4%.

"It's kamikaze pricing," said Sam Cooper, head of portfolio management for Chase Manhattan Mortgage Corp.

In fact, the pricing is so low that traders call it "beneath the screen." Translation: The loans are offered at rates that are as much as 150 basis points below where they could be sold profitably on the secondary market.

Effect of Higher Rates

The aggressiveness marks a big change for the thrift industry, which spent the past few years licking its wounds from credit problems. The industry also was hurt by low interest rates, which boosted the popularity of fixed-rate mortgages, the specialty of mortgage banks.

In recent weeks, however, rising rates have caused more consumers to consider adjustables, which carry lower initial rates and long have been the favored product of thrifts.

Moreover, thrifts once again have the capacity to lend.

Appetite for Loans

"Asset quality has turned around," said Gary Gordon, a thrift watcher at PaineWebber Inc. "They haven't grown for three years and have bolstered capital" - all factors that give the lenders an appetite for loans.

A typical participant in the new aggressiveness is Nutmeg Federal Savings and Loan, a small Danbury, Conn., lender that until last Friday was offering a one year ARM with a starting rate of 3.5%. That rate has since been increased to 4%.

William D. Starbuck, executive vice president at Nutmeg, is blunt about his intentions: "It's a relationship business and we are buying market share."

He added that Nutmeg and others are "saddled with a lot of liquidity. We can buy Treasuries or invest in a loss leader, maybe losing some money in the short run but making it up long term."

Structural Advantage

None of which appeases thrifts' critics.

"I can't compete profitably with a loan like that," said a loan buyer who sells into the secondary market. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Thrifts Slash Prices in Heated Battle for Adjustable-Rate Loans
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.