ChuckJaffe

BOSTON (MarketWatch) — There’s plenty of news lately that might have a direct connection to your pocketbook.

For instance, amid all of the hullabaloo over stock market volatility, a lot of people have missed out on the fact that the 10-year Treasury note has dropped, but that mortgage rates — which typically are pegged to the decade-long note — have basically stayed put.

While mortgage originators don’t seem to want to say much about the situation, there is little doubt that with all of the fears over the subprime mortgage situation, issuers are looking for a bigger cushion, keeping a little bit more in reserve for themselves.

How long that situation continues is anyone’s guess, but Greg McBride, senior financial analyst for BankRate.com, believes it will last until originators feel more comfortable about market conditions, and believe they can narrow profit margins on new loans without cutting into their overall profits. If demand declines, that could be a long time off.

Rising rates on jumbo loans

Another bit of weirdness in light of the decline in 10-year Treasury yields is that jumbo mortgage rates are on the rise.

Jumbo mortgages are for loan amounts north of $417,000, and they do not have the backing of Freddie Mac or Fannie Mae. It is that lack of protection that seems to have rates rising at a time when, intuitively, they should be declining.

According to McBride, conforming rates — those for loans below the $417,000 threshold — were recently at 6.75% on average, with their jumbo counterparts pegged about 0.25 percentage points higher. Today, many lenders have increased the distance between the two types of loans, with jumbo borrowers being forced to pay a rate 0.5% to 1.0% higher.

Clearly, if this situation holds, it will impact inflation in home prices, as some borrowers will be put off by the high cost of having the big mortgage. McBride doesn’t see that happening — he suggests that the situation is more a classic overreaction by people watching the bond market — but acknowledges that people in need of a big note may want to put off their purchase deals until they see if the rates come down over the next few weeks.

Not only the subprime market?

While optimists want to say that the problems with the mortgage market are mostly due to the subprime crisis, there’s definitely some evidence that credit problems have spread to a higher grade of borrower.

Countrywide Financial, for example, recently published a report which showed that higher-quality borrowers are starting to suffer. Several big issuers of Alt-A loans — mortgages for people whose credit is strong enough so that they don’t require income verification — are starting to report increases in non-performing assets. That’s bad news and will make mortgage issuers antsy.

The year ahead

Put all of the events together and you are looking at a very interesting fall. More than $50 billion in adjustable-rate mortgages are due for a re-set in October, and the re-set level will remain above $30 billion per month through September of 2008.

People looking at those re-sets should start shopping now; while mortgage terms have room for improvement based on current rate conditions, they also have a lot of potential to get worse right as those adjustable-rate borrowers really want or need to get a new loan.

ATM turns 40

It’s hard to believe, but the automated teller machine, or ATM, is turning 40 years old this year. While the machines did not go into widespread use until the 1970s — when banks used to advertise that they had machines that their competitors hadn’t introduced yet — there are several banking industry analysts now doing reports about the four-decade development of banking machines.

At this point, there is one ATM for every 284 American households, according to Mercator Advisory Group in Boston. The interesting thing, however, is the trends in usage.

A Mercator report is one of several indicating that the ATM market has gone flat, with transactions remaining stagnant or falling slightly. The interesting question is whether that represents a mid-life crisis for the ATM, since the conclusion to be drawn from fewer ATM transactions is that more consumers are using debit cards and accessing cash as an add-on to a transaction at a point-of-sale terminal.

With the Federal Reserve Bank continuing to push efforts to make America as close to a cashless society as possible — and with many people finding fewer reasons to carry cash — the real question is how the ATM will evolve, what other services can be offered from a banking machine and how institutions can continue to profit from offering ATMs.

That also raises a big concern for consumers; namely that fewer ATM transactions mean that financial institutions will have to raise fees, soaking consumers that much more for the use of machines owned by other banks, and more. And if banks can’t keep the fee income up from ATMs, there is an additional worry that they might increase fees at those point-of-sale terminals.

That means card users need to have a good handle on how their banks charge fees on cards. Some ding you for a fee only at a foreign ATM — when you will pay a tariff both to the bank that owns the machine and to your own bank — while others slap you for a fee whenever you use your debit card at a checkout terminal. Still others charge you when you use your check card as a credit card.

What consumers have not learned over 40 years is that small convenience fees really add up. Financial institutions are counting on that trend to continue for many years to come.