Housing and Mortgage Crisis- How’s This Going to Affect You in the New Year?

This is usually the time of year when those of us in the industry are winding down for the year, and are contemplating our marketing plans and strategies for the New Year.  It’s also a time for many of us to close out what we need to get done, hopefully before the Holidays, and kick back and enjoy the remainder of the year.  In years past, I have often looked back happily on what has transpired during the year with anticipation for what I would do the following year. 

This year has been, to say the least, an exception to the rule.  It’s also been one of the most eventful and painful years that I have experienced in my 37 years in the business.  Personally, I can’t complain too much for myself, but the year has brought a lot of changes to our industry……….most of them pretty painful and drastic.  I have also lost many friends in the Real Estate and Lending industry, and other Affiliated Sectors, either to company closures or just plain throwing in the towel due to lack of business. 

In an earlier post, I bought you information about what Senator Dodd has recently proposed in regards to Predatory Lending.   I spent quite amount of time in November covering Congressman Barney Frank’s bill HR 3915 ( See November Archives ), which is the counter part to Senator Dodd’s new bill S-2495.

 I could probably go on here for pages outlining what I think caused many of the problems or issues, as well as, who was to blame.  Believe me, a lot of people out there are throwing stones at almost anyone in the business in some way, shape or form.  Personally, I believe there is plenty of blame to go around in many of the industry sectors, as well as, the government.  In fact, it’s my belief that it actually starts at the government level, but that is a book in itself. 

On the other side, I have seen and spoken to people who were placed in homes and loans that were way over their heads or means to afford.  In a declining market, it is really painful for me to have to look someone in the eye or tell someone over the phone that I can’t help in any way.  I’ve always had a can do attitude with a goal to help other people, especially those in need.  

 Quite honestly, for me the biggest problem that I have experienced this year started in August when the “ fallout “ really started it’s downward spiral.  It’s been continuing ever since, and has made it difficult for me to handle my Realtor and clients’ requests in what I consider to be a professional manner.  With all the fallout, many of us in the lending arena have experienced drastic changes to underwriting and credit standards.  It’s is now not uncommon to get several notices daily from lenders on different changes to their guidelines or sometimes complete elimination of programs.  Frankly, this makes my job and that of my Realtors so much more difficult.  The difficulty comes when we are all trying to ensure that our clients are getting the best service and terms available. 

Personally, I think that much of this is the result of the media hype And government posturing and changes to regulations.  Ever since Congressman Frank’s bill, HR 3915 passed the House, the Lenders have been going insane with changes to their programs or guidelines as mentioned above.  It’s like the Pendulum going from one extreme to the exact opposite.  Unfortunately, we had severe casualties when things got too loose.  Now, we are causing more casualties……this time taking lender standards to levels and constraints almost unseen.  Many people with impeccable credit and income are even having difficulty finding financing today due to all these changes. 

My point to all of this is not actually to sit here and make excuses, but rather to educate those of you who are interested in what exactly is happening.  Let’s face it, as a Realtor you depend on us to take the ball so to speak and carry it across the goal line so that your client completes their touchdown to homeownership.  Maybe if you are a listing agent, you are relying on us to ensure your seller closes the transaction that you helped negotiate with a new incoming buyer or buyer’s agent. 

I believe it is critical for all of us who plan on remaining in the industry to get off our behinds so to speak.  Specifically, be proactive in your industry, and ensure that you are aware of what is happening within the government that could affect the industry. 

I am not saying that I have all the answers to the problems that we face today…..although I am of the belief that I’ve got a pretty good insight as to what’s happening and why it happened.  In the coming days and weeks, I plan on following Senator Dodd’s new bill just as I did with Congressman Franks bill, HR 3915.  If I know one thing, I know with all their good intentions, that most of the time these Legislators normally make things worse.  Often times, they are merely posturing politically or pandering to some major interest group. 

Regardless of whether you agree with me or not, just make sure that you stay fully involved in what’s happening in your sector.  Moreover, you may need to check out what is happening in related sectors for what may eventually affect you and yours.  Finally, and again regardless of the side of fence that you are on, voice your opinions to you industry leaders, and state / federal legislators.  Let’s keep their feet to the fire to ensure that whatever they do, they know just how we feel and what side of the fence we are on for matters they are addressing. 

The survival of our industry as we know it, depends on this participation by you and your colleagues. 

 

Looking for an Ethical and Knowledgeable Lender, See My Link below:

 

http://ocmortgagefinder.com/index.htm

 

 

Only 6 Days Until Christmas !!! 

Best Wishes and…………….. Merry Christmas Everyone  

Senator Dodd Proposes New Bill S-2452

On December 12th, Senator Dodd put forth a new bill, Senate Bill S-2452.  This is a counterpart to the Bill passed by Congressman Barney Frank , HR- 3915, in November that overhauls the Lending Industry.  Both bills are designed to prevent and foster measures to circumvent Predatory Lending.

While the Legislator’s intentions are admirable, the consequences of their Bills are going to be far reaching to say the least.  I am not going to sit and write here that there have not been abuses in the system or industry.  In my opinion, the blame can go to many, and is not just with one sector of our industry.  I could almost write a book on the past exploits that I’ve seen take place over my many years in the industry.

My point in addressing this blog to you is to first ensure that you are informed of what is taking place back in Washington.  Truthfully, I myself, have not had the opportunity to fully read and analyze the Senator’s bill as I did with Congressman Frank’s HR 3915.  Regardless of what side of the fence that you are on regarding this issue, the fact remains that the decisions being made in Washington today will have some widespread affect on the real estate, lending, builders, and other related sectors of our business.  Again, while the intentions may be good, too often the results are politically motivated and laced with wording and changes that sometimes only help certain interest groups.

I urge you to educate yourself on this and other pieces of legislation that affect our industry as a whole.  Then decide.  For your review, although it is long and dry, is a copy of the proposed legislation by Dodd.  The link to it is listed below for your convenience.  Over the next few days and weeks, I am certain that I will provide you with more information and clarification on this bill.  In the meantime, read it since it affects you and your clients, and let your respective Senators know your point of view.

Link to Dodd’s Bill S- 2452:

http://www.namb.org/images/namb/GovernmentAffairs/Dodd%20Bill.pdf

If you are in California and need Ethical and Knowledgeable mortgage assistance, please refer to my link also listed below:

http://www.ocmortgagefinder.com/

 Only 7 Days Until Christmas

Peace and Merry Christmas

Jumbo Mortgages / There May Be a Saving Grace

The last three to four months have really played havoc on the real estate and mortgage industry along with the various servicing companies that depend on these sectors for a living.  August was the month when the bottom really fell out of the mortgage industry, and it’s been a roller coaster ever since.  Most of the problems really heated up when the subprime debacle, and the consequences, unleashed it’s wrath causing company after company to either close it’s doors or announce huge losses stemming from this sector of the business.

Since I am in Orange County California, I can tell you first hand that our industry has been hit hard, and one area in particular is the non-conforming or sometimes referred to jumbo market.  Typically Fannie Mae ( FNMA ) and Freddie Mac ( FHLMC ) take up the slack for those loans under the current limit of $ 417.000.  The market above that limit, the jumbo market, is for the most part dependant on investors on Wall Street who buy and sell these loans. 

The debacle with subprime loans has left many of these investors reeling from losses, and possibly more losses to come.  The result has been described by some like a train hitting a wall or car going 90 mph with the brakes being applied almost full force.  The outcome has been almost a complete erosion in the secondary markets for lenders to sell their jumbo loans when they don’t fall within FNMA or FLLMC linits or  guidelines.

Consequently, many of us here in Orange County and in areas of the country where home prices do not normally fall within the limits of FNMA or FHLMC, are without many sources of funds to make these loan.  Yes, they are still available, but the availability and certainty of funds has raised interest rates in this sector way beyond normal expectations.  Additionally, lenders are changing underwriting guidelines so drastically that only those in the very top categories of income and assets can qualify for these loans.

The word has been spreading for weeks as to the urgency of this issue.  The subprime debacle which helped to create foreclosure levels almost unseen is bad enough on it’s own merit.  Yet, many outside those issues and wanting to refinance or purchase have almost been cut off at the knees for lack of funds, unreasonably high rates, just because they are above those limits set by FNMA andFHLMC.

So today, we got what may be some potential welcome relief on the jumbo market front after Treasury Secretary, Henry Paulson, was interviewed during his speaking engagements throughout the country.  Secretary Pauson made comments today in an interview that just may give both the housing and mortgage industry the shot in the arm that is needed with respect to jumbo loans.

To see a commentary of his interview, please refer to the link below to Bloomberg:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aax4zzPqV9dk&refer=worldwide

In California and seeking expert advice and choices on mortgage lending, see my link below:

http://ocmortgagefinder.com/index.htm

 

Only 8 Days Left Till Chrismas

 

 Peace and Merry Christmas

Senate Approves Bill to Raise FHA Limits

The Senate passed a Bill today, Bill number S.2338 which would help FHA and raisethe limits in areas throughout the country fairly substantially.  The Bill is designed to assist those suffering from the Subprime debacle, but also adds features like the limit increase which will help more buyers to FHA.

The limits in Less expensive housing markets would be raised from $ 200,160 to $ 271,050.  In the Higher cost areas such as California, the limits would be raised from it’s current limit of $ 362,790 to $ 417,000.  The increase would keep FHA in-line with Fannie Mae and Freddie Mac limits currently in place.

FHA over the years has seen it’s importance and relativity greatly reduced by loan limits that have not kept up with the real estate markets.  The move is designed to foster more interest in these types of loans vs. conventional financing.

If you would like more detailed information, I have included a link to Aol where the article was spotted.  It gives a much more detailed account of the whole reasoning on this matter, as well as, links to the House and Senate if you wish to view the Bills direct.  Please see the link below:

http://news.aol.com/story/_a/senate-votes-to-help-strapped-homeowners/n20071214172009990009 

Need Mortgage Advice, Refinancing, or New Purchase Loan……..Looking for a Ethical, Knowledgeable, and Results Oriented Lender…..then check out my Link below:

http://ocmortgagefinder.com/

Peace and Merry Christmas

Only 9 More Days Till Christmas…..LMAO…I haven’t even Started Yet !

Fed Rate Cut, Mortgage Rates Go Up, What’s Going On In the Market?

It’s been two days since the Fed Rate Cut, and many of us in the Lending business are sitting here Wondering just what is going on.  A lot of people always assume that when the Fed raises or lowers interest rates that Mortgages automatically follow suit in the Same direction. 

One misconception that needs to be clarified is the issue regarding mortgage rates verses the tie in to Fed Rate Changes   More than a few years ago, mortgage rates typically followed Longer Term Bonds such as the 30 Year Treasuries.  Just a few years ago, the government in their infinite wisdom, decided to stop issuing and selling these long term Treasuries.  Ironically, they are now issuing these on a limited basis.  Go Figure.  The point is here that too many people assume that any Reduction or Increase in the  Fed Funds Rates should immediately affect mortgage rates.  The Answer is NO, or more correctly, not necessarily.

The reason being is that the Fed Funds Rates is Tied to Short Term Borrowing.  This is why many of you see the Prime Rate Drop or Rise almost immediately when they change this rate.  Mortgages, typically as I said, are Tied to Longer Term Rates such as Treasuries.  But wait!  Let’s make this a little more confusing, eventually these Longer Term Rates will in Most cases follow the Shorter Term Rates as well.

After the government temporarily stopped the issuance of 30 Year Treasuries, the Market forces as they be, started to follow the 10 Year Treasuries when setting mortgage rates.  One reason given was that most households don’t hold on to their mortgages for more than 10 years. Today, therefore, most of us Lenders in the Know try to follow the movement on the 10 Year to determine the direction that they are headed.

So, Where does that bring us now? On Tuesday after the Fed reduction, based on typically what would have happened after personally following Years of  Detailed History, Mortgage rates should have taken a Temporary Blip up.  This blip up or down normally happens, depending on the direction of change of the Fed Funds rate.

As we all know, ever since the escalation and Meltdown of the SubPrime Debacle that Nosedived in August, the Market has Not quite reacted to changes in the market as they would normally have done based upon case history.  Rates should have gone up Slightly on Tuesday, but instead, the Bond market Rallied sending Treasury Yields and Mortgage Rates Tumbling.

Then yesterday,  the day after the Federal Open Market Committee Meeting where rates were Lowered,  the Fed announced that in concert with three other central banks and the European Central Bank they were going to Infuse about $ 24 Billion dollars to the ECB and the Swiss National Bank to Increase the supply of dollars in Europe.  The reason for all this was due to the fact that the world’s major central banks have been struggling to restore Liquidity since the market for assets backed by U.S. Subprime mortgages collapsed.  THIS sent the Treasury Markets here Reeling and Erasing All Gains from Tuesday’s announcement.

Today, in-conjunction with More Loan losses announced by B of A, Wachovia, and PNC Bank, the government announced that Retail Sales and the Consumer Price Index for November Rose More than Anticipated.  Good News for the Economy as far as Retail Sales, but Horrible News for Bonds.  Consequently, Treasuries Again Fell through the Floor Raising Yields and sending Mortgage Rates back up again in addition to Wednesday’s increase.  This is Why mortgage rates have for at least the time being have shot back up.

SIDE-NOTE for those Old Geezers like me, but Rates are Still LOW.  In 1981 when I was a VP at Union Bank, I was lending to couples mortgages that were in the 16% to 17% range.  It wasn’t until 1986 that rates came back down to under 10%, and we haven’t even been close to getting back that high in quite a long time.  I am simply amazed when people tell me that rates are just Too High. 

Simply put, those actions and announcements listed above are the reasons why rates have Escalated.

To see more, refer to the links below to Bloomberg for the last two days for Exact Details. Treasuries Fall

http://www.bloomberg.com/apps/news?pid=20601087&sid=awN333fyQw6s&refer=worldwide

Fed, EUB to Ease Crunch

http://www.bloomberg.com/apps/news?pid=20601087&sid=a8Oed.hCgAvo&refer=worldwide

Retail Sales/ Consumer Price Index

http://www.bloomberg.com/apps/news?pid=20601087&sid=aimb0vpmKjI0&refer=worldwide

 Seeking Ethical, Knowledgeable, and Results oriented Mortgage Assistance.  Visit my link below:

http://ocmortgagefinder.com/index.htm

Fed CUTS Rate 0.25%, MORE To Come?

It’s official, the Federal Reserve Open Market Committee lowered it’s benchmark interest rate by 0.25% this morning.  If you have been reviewing my blog-refer to the archives section to your left for several past articles.

Now the big question on everybody’s mind, are there going to be future cuts?  From reporting done today in Bloomberg, many think so.  I’ll bring you more information on this subject, as well as, information affecting the real estate and lending industries as I am able to do so.

To review today’s announcement, along with suggestions for future reductions or direction in the Fed rates, refer to the link below:

http://www.bloomberg.com/apps/news?pid=20601087&sid=atye.jOlLAmQ&refer=worldwide

In California and looking for mortgage assistance from an Ethical, Knowledgeable, and Results Driven Lender, see my Link below:

http://ocmortgagefinder.com/index.htm

Peace and Merry Christmas

Fed Rate Cut, ONE Day and Counting !

Tomorrow is the next scheduled meeting for the Federal Reserve to determine the next move for interest rates.  Over the last week or so, I have written several pieces detailing comments from various key figures, as well as, noting things that have taken place on Wall Street and in Politics that may affect the outcome.

If you are so inclined, refer to my archives sections to your left to review several detailed articles that I wrote on this subject.  Each was supported with comments from key figures and details of events happening in the U. S which could affect Tuesday’s meeting.

 Since Friday after President Bush’s Freeze on Subprime Loans, the market has suddenly shifted in the other direction with respect to sentiment on Tuesday’s predicted outcome.

Since I am a mortgage lender, I closely follow the market each day to determine the current trends in rates so that I can counsel my clients with knowledgeable information as to the direction of mortgage rates.

Today’s Bloomberg has an interesting piece on Brian Sack, former head of monetary and financial analysis at the Fed in 2003 and 2004.  If Sack’s analysis is correct, he indicates that investors in Treasuries might be up for a fall.  It’s a good piece and worthy of review.  At this point, after almost certainty that rates would be reduced by at least 0.50 %, news and happenings over the last two or three days suggest that we may not get what many are hoping for in Tuesday’s meeting.

For Sack’s take, refer to the link listed below:

http://www.bloomberg.com/apps/news?pid=20602007&sid=aXJrY_sFer5E&refer=rates

For mortgage information in California, refer to my link below:

http://ocmortgagefinder.com/index.htm

 Peace and Merry Christmas

Fed Rate Cut ? Bush / Subprime and More

Well….if you have been following my blog over the last week or so, everything I’ve been touting has been towards a good size rate cut on Tuesday during the next Fed meeting.  I’ve even produced scores of interview documentation which reinforced the speculation of almost a certain rate reduction.  Additionally, if you’ve been reading my posts, I told you that Things can change on a dime after a comment from someone-close to the Know or a Big change happening somewhere.

Remember, I’ve also been reporting how Treasuries have been Rallying on Wall Street Bets for a 0.50% cut;  the outcome, has been a sharp drop in mortgage rates during that time period to lows unseen since the early days of 2004.

Then today, President Bush announces a Freeze on Subprime Rates for those potentially facing foreclosure.  So what does the market do?  Turns on a Dime.  It really doesn’t matter your affiliation, whether conservative or liberal, the market reacts to news as it always does.  In this case, there is a mixed bag of sentiment on how this is going to affect the market.  Most importantly, those investors on Wall Street who buy mortgage backed securities that help finance many of the loans that are made.  Bush’s decision today, whether you agree with him or not, has sent markets Reeling over the affect this will have on Investors and the market alike for future offerings.

Quite candidly at this point, I have not had sufficient time to fully analyze all the news and data enough to yet formulate my own decision on the matter.  After 37 years in the banking and mortgage arena, Nothing surprises me anymore.  Markets change on a whim depending on who says what and what transpires in the market.  Don’t get me wrong, mortgage rates are still at very good levels, but the decreases of the last week have Temporarily been lost to today’s news.  So, where does this leave us?  At this point, it’s anybodies guess.

On one side, today’s news is good for lenders, selected consumers with subprime mortgages, and possibly the economy as a whole since this freeze will undoubtedly curtail the avalanche of foreclosures that we have been seeing of late.  They will still continue, but the size and shear volume of numbers maybe pulled back and come into some semblance of control.

The adverse side, is where the Investors on Wall Street come in for future purchases of these securities.  If the foreclosure activity and losses alone from the devaluation of the securities is not enough to scare investors, what now with Bush’s proposal to Freeze rates?  Essentially, this gives these Investors reason for pause regarding future purchases.

Either way, the outcome is not certain just how this is going to affect the market as a whole.  This should play out interestingly over the next few days and weeks, maybe months, before we know the benefit or fallout from this decision.

One thing is certain, Wall Street is now uncertain just what is going to happen.  For that reason, Traders and many speculators on Wall Street are hedging their bets that a reduction in rates on Tuesday May Not Be a Sure Thing…Or if any reduction…The Extent of it.  In the meantime, Treasuries today, erased  a fair portion of their gains over the last week or so.  Yields on the 10 Year Bond increased today to 4.11 at today’s close.  While mortgage rates are still good, the lows seen late last week and earlier this week are gone.

Refer to the links below for detailed news from Bloomberg on Bush’s plan and a separate article on Treasuries.  In the days ahead, I will try to keep you informed as things progress. 

In California, and looking for an ethical and knowledgeable Lender?  Then check out my link at the bottom of the page.

Link to Bush

http://www.bloomberg.com/apps/news?pid=20602007&sid=a.YBGDHmw9VQ&refer=rates 

 

Link to Treasuries

 

http://www.bloomberg.com/apps/news?pid=20601087&sid=a6UVl8irRYmU&refer=worldwide

Link to Great Rates, Ethical and knowledgeable Service

http://ocmortgagefinder.com/index.htm

Peace and Merry Christmas

Fed Rate Cut, This Guy Knows His Stuff !

The Federal Reserve Board Meeting is fast approaching; Tuesday, December 11th, is the actual day for the Fed Committee to meet and decide the fate of interest rates.  Some of you whom have followed me may have different views, and wonder just who am I, and possibly thinking that I am way off base.  Personally, I believe we are headed for a 0.50% cut on Tuesday to the Fed Funds rate.

Another source that I follow is Bill Gross, Manager of the worlds biggest bond fund at Pimco Investment Management Co in Newport Beach, CA.; his company is right down the street from me , and has been for years viewed as an expert in this field.  Mr. Gross’s accomplishments and success are cited by many journalists and economists around the United States and the world.

As crazy as some of my takes have been over the last few days from a few comments that I have received, Bill Gross of Pimco seems to think that the Fed is going to be faced with a much Lower Target than I have projected over the long term.  Gross indicated today that he feels the Fed may have to lowers rates to around 3% in the near term to support the economy and keep it on track.

Before you throw me out with the Bathwater, realize that Gross has built a very successful business over his career, and many feel that his insights and ideas separate him  from the pack so to speak.  Again his track record is pretty impressive including his often insightful knowledge of the market.  I have followed him for years, and have found him to almost always hit the mark on things, or have his predictions come true in a high percentage of cases.

All this being said, it’s almost a certain bet that Tuesday will bring another rate cut.  Bets are that we will drop a full 0.50% based on comments from various Fed members to Wall Street Traders and Economists.

Since I am in the mortgage industry, I need to and do follow this kind of information daily so that I can direct my clientele with the most up to date and accurate information that I have at my disposal.  If you care, review my posts for the last week and month for daily commentary and facts.  To read what Gross has to say, please refer to the Bloomberg link listed below:

http://www.bloomberg.com/apps/news?pid=20602007&sid=awdtoW1d5a1k&refer=rates

Need or know someone looking for mortgage assistance.  Rates are at Extreme Lows.  Even if you don’t want to contact me ( I serve California Only), CONTACT SOMEONE. 

Check out my link below:

http://ocmortgagefinder.com/index.htm

 

 Peace and Merry Christmas

Fed Rate Cut on Tuesday, One Last Time

Any of you following my daily blog can attest to my vigor in trying to educate those inquiring about the Fed’s rate direction for next Tuesday’s meeting.

 Refer to my Archives for both November and this month for detailed information.  After publishing several key comments from Federal Reserve Board Members; today Traders in Futures Contracts chimed into the mix with their consensus.

It seems like everyone these days, including me, are betting that Tuesday’s meeting will bring a 0.50% reduction in rates with the Fed.

I’m beginning the feel like a broken record here, but below is today’s commentary from Bloomberg citing Futures Trader Bets for Tuesday.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a8OH7oLksMJs&refer=worldwide

As a Footnote, Mtg Rates are at Killer Lows from all this news.  If you are in CA, call me- Even if you don’t- Call SOMEONE- You Might be Glad you Did.  See my Link below:

http://ocmortgagefinder.com/index.htm

Peace and Merry Christmas