My New Blog

Paul Smalera

Moneywatch.com

Of all the extraordinary ways the Federal Reserve mainlined dollars into our economy to stave off a second depression, its biggest program by far was the 18-month, $1.25 trillion purchase of mortgage backed securities (MBS). These securities are pools of thousands of individual mortgages, packaged and auctioned off to investors, to pay a steady rate of interest, much like bonds. When investors stopped buying in the credit crisis, Bernanke backed up the truck and started loading up. On April 1, he’s planning to close the door and drive away.

The Fed’s purchase program was designed to keep mortgage rates low and stable, and to keep banks lending, and it worked. Though lending standards have generally gotten stricter, mortgages are readily available to qualified buyers, and 30-year fixed rates have hovered around 5 percent for more than a year-and-a-half. Once the economy started to recover, however, the Fed has said that it would end its purchase program on March 31, and the timing and specifics of how the Fed pursues its exit strategy are likely to have a profound effect on the economy and your financial life. One thing’s for sure, though: The interest rate you pay to buy a house or refinance a mortgage around April Fools Day.

That’s because the Fed’s massive purchases have been a stand-in of sorts for private investors. Scared off from the mortgage markets during the financial crisis that began in 2007, these investors, mainly large institutional money managers and investment banks, are just now beginning to step back in as the Fed steps out. But where the Fed was content to play caretaker, private investors will demand profits, and won’t be acting as monolithically as the Fed. As a result, mortgage rates will likely increase, as will their volatility.

Mortgages at ‘Rock Bottom’

Just how high rates will go, however, and when they’ll start to move, isn’t yet clear. Lawrence Yun, chief economist for the National Association of Realtors (NAR), says 30-year fixed rates are “rock bottom” and simply cannot stay at 5 percent. That much, economists, analysts, and the Fed all agree on. But just how high they’ll get is another question.

Fed Vice Chairman Donald Kohn told a conference last month that any increase in rates is likely to be “modest” but added “that judgment is subject to considerable uncertainty.” Yun believes 30-year fixed rates will probably end up jumping to about 5.7 percent by year’s end. Freddie Mac, which issues many of the MBS being bought by the Fed, said in late December that rates would hit 6 percent by the end of 2010, sending a shock through the market. But Amy Crews Cutts, Freddie’s deputy chief economist, now foresees a rate increase more in line with Yun’s prediction, saying that any upward pressure on rates will likely be offset by a dropoff in demand. Bill Gross, head of Pimco, one of the largest and earliest private investors in mortgage-backed securities, believes that due to a rising interest rate environment in general, mortgage rates could settle anywhere between 6 to 6.5 percent, but admits at this point he’s simply making an educated guess.

Economist David Rosenberg of investment firm Gluskin Sheff also estimates that rates will end up north of 6 percent. Rosenberg is notably dour on the economy - he gave President Barack Obama an “F” for his handling of economic matters in a recent MoneyWatch report card - but as he explained in a recent paper, his prediction is based primarily on the fact that the era of “unbelievable support for the housing market” by the Fed is coming to a close.

Rosenberg emphasizes that this will lead to “heightened volatility in all the markets,” so if you’re a homebuyer, the rate you qualify for when you start shopping for a house could be significantly different than the rate you end up with by the time you sign your mortgage. As a result, locking in a rate makes a lot of sense.

On a $300,000 loan, the difference between a 5 percent rate 6.5 percent is $300 per month, or nearly $100,000 over the life of the loan. So if rates do head higher, those larger monthly payments will squeeze buyers and could cause housing prices to fall.

Feds Trying to Keep Rates Low

Despite the looming end to the Fed’s MBS program, Bernanke and the Obama administration remain open to extraordinary measures. They’ve both expressed a clear desire to keep interest rates low, even if private investors don’t materialize, or if those investors demand ruinous rates of return on the MBS's they are willing to buy. Even now, government entities Freddie Mac and Fannie Mae have announced they will spend considerable money to smooth the functioning of the MBS market. And if those moves fail to spur private investors’ return to the market, the Fed itself has signaled it would consider restarting its purchase program later this year.

The bottom line is that housing is just a far too large and interconnected sector of the economy to risk damaging any further. That’s why even pessimistic economists can’t imagine mortgage rates above 6.5 percent right now, and why Fannie and Freddie and ultimately the Fed are all ready to step back in should things falter, and are proceeding with such caution. Getting it wrong could worsen the unemployment picture and even spark inflation, setting the recovery effort back by years. “Housing is just so important for broader economic recovery,” says NAR’s Yun. “To pull the plug now would be a huge wasted effort over the past year, to start at page one again.”

What this means for you is that if you’re going to buy or refinance a home, interest rates probably aren’t going to get lower than they are right now, but don’t panic: They’re also not likely to get too high, either. And of course, there is one last thing to consider: the price of a home itself. The latest Case-Shiller Home Price Index report from Standard & Poors shows that national home prices continued to decline in the fourth quarter from a year earlier, although at a much slower rate - 2.5 percent - than previously. (Keep in mind that different markets are seeing very different price movement: San Francisco is up; Vegas is down.) So even if you qualify for a rock-bottom rate buying may not be worthwhile in the near term. Especially not if you end up being underwater on your brand new mortgage.

Spring is almost here!  Traditionally this means home buying season. This year should be a little different. With the home buying tax credit ending at the end of April, we may see the shopping begin earlier.  If you are in the market you need to start shopping now before the tax credit goes away.

Rates are still real low. However they have been artificially low due to the Fed injecting a Trillion dollars into mortgage backed securities. That well has run dry and the Fed will no longer be of help. This means that very shortly mortgage rates will begin to rise.  If you are looking to refinance now is your last opportunity.

Call me today for all the mortgage changes and programs

Mike

248-860-3555

Interest rates have finally dipped below 5% again.

* Fannie Mae and Freddie Mac programs are available for those that are under water.

* Tax credit has been extended

* Ask me about free $$$ to apply to your down payment

If you have any mortgage questions or know anyone that may please have them contact me.

Thanks,

Mike

248-860-3555

FHA Streamline Refinance Program: Who, What, and Why Posted: 10 Sep 2009 12:45 PM PDT The Federal Housing Administration (FHA) is offering a streamline refinance option to homeowners who have FHA mortgage loans. In order to be eligible for streamline refinancing, you must meet these criteria: Your existing mortgage is insured by FHA (you have an “FHA loan.”) Mortgage payments on existing mortgage loan are current (defined as not more than 30 days past due on mortgage payments) The streamline refinancing program is limited to refinancing intended to lower monthly mortgage payments. You may not refinance for additional cash with a streamline refinance.  Mortgage lenders offer three options for paying closing costs on streamline refinance transactions: “No closing costs:” Actually, you’ll pay closing costs with a higher mortgage rate. Your lender absorbs the closing costs, and you repay them over time with a higher mortgage rate. Roll closing costs into refinance amount: This means that your new mortgage amount will include the closing costs. As a general example, if you’re refinancing for $275,000 and your closing costs are $3000, your new mortgage amount would be $278,000. This option is only available if you have enough home equity as documented by a residential real estate appraisal. If you don’t have an appraisal, you can refinance for no more than your existing mortgage balance. Pay closing costs “up front”:  This is the traditional method of paying closing costs; you contribute enough cash to pay closing costs when your refinancing is completed, or “closed.” Who Can Benefit From an FHA Refinance? Homeowners struggling with monthly payments:FHA refinancing provides an opportunity for reducing higher than market mortgage rates. By lowering the interest rate of your mortgage loan, your monthly P& I payments will also decrease. This provides financial flexibility, and can make pre-paying your mortgage loan easier. Homeowners with credit issues:  As long as you can qualify under streamline refinancing program requirements, it won’t matter if you’ve had credit problems including bankruptcy. Why Stay with FHA? Of course it’s prudent to shop FHA mortgage rates and terms, but lenders may offer non-FHA mortgage refinance options. Here are some benefits of staying with an FHA loan: No pre-payment penalty: FHA loans have no pre-payment penalties This means that if you choose to pay your mortgage off early, or sell your home , you won’t be charged a penalty. FHA mortage loans are fully assumable:  If you sell your home, and the buyers can qualify under FHA mortgage guidelines, they may assume your mortgage loan. This can be a big plus for attracting buyers, as i allows them to take over your mortgage payments with minimal mortgage underwriting. FHA provides homeowner assistance programs: FHA offers troubled homeowners a variety of loss mitigation and foreclosure prevention options through their mortgage loan servicers. If you ever have problems making payments, FHA programs can help save your home from foreclosure. Refinancing your mortgage loan with FHA’s streamline refinance program can help you stabilize your finances, save money on mortgage rates, and offers flexibility not always available with other mortgage loans.

* Interest rates are low!

* 1st time homebuyer credit of $8,000 is set to expire

* Your ARM may be adjusting lower but be careful.  You may want to refinance now even if it is a higher rate. Call me for details.

** Never before and maybe never again will we see Home prices this low.

I think this is a very interesting question and would like to get your input.  My belief is on a national scale we may be heading out of the recession. Locally in Michigan I think we have a ways to go.

With that being said I think if you are thinking about buying a house now is the time. As the national economy recovers, interest rates will increase. The fed will not step in and save Michigan.

If you know of anyone in the market please have them call me.

* Please chirp in on if you what you think the status of our economy is.  Hmm chirp in. maybe we should start chirp.com instead of twitter.

Mike

248-860-3555

Mortgage Refinancing For Underwater Borrowers Now Available

 
The Obama administration is furthering its efforts to jumpstart the credit and real estate sector by widening and softening the requirements for home loan borrowers to qualify for mortgage refinancing relief. The specific requirement that has been modified is the percentage of the home loan you must own before you can apply for mortgage refinancing aid.

Until last week all qualifying borrowers must own between 80% and a 105% of their loan. This means that the mortgage must be between the 80% and 105% of the house’s value. This was a rather restrictive requirement, especially in areas where the market went into free fall and home prices dropped by 40%.

The amendment to this requirement means that more loan borrowers, some of those that have been hit worse by the crisis will qualify for refinance aid.

What are the details of this home refinance aid program adjustment?

Eligibility has been expanded to borrowers that owe up to 25% more than their homes are worth. This means that even if your mortgage is 125% of the house’s value, you will still qualify for mortgage refinance aid.

To illustrate:
Imagine (not too much imagination is required) you bought a house for $600,000. You bought an 80/20 mortgage (which means you paid 20% of the house with savings or other finance besides the principal mortgage) which means you were left with $480,000 to pay for. A year after the price of your beautiful home has dropped to $400,000 leaving you $80,000 in the red. Under the previous requirements you would not have qualified for refinance aid as your mortgage was well above the value of your house. With the new eligibility requirements you would qualify because your mortgage is still within the 125% of the market value ($500,000) of your home. 
Of course this is not a solution for all borrowers. For those who bought 100% or even 125% loans and then saw prices drop by 20% to 40% in areas like California the latest changes are still not enough to include them.
Critics however say that the limiting factor on this Mortgage Refinance Aid is now not so much the Mortgage to House value index but the requirement that all qualifying loans are backed by Fannie or Freddie. Some analysts point out that it is more likely that the bulk of mortgages that are upside down and in dire need of refinancing aid are those of other products not Freddie and Fannie loans.

An example of this are the cases of Nevada, California, Arizona and Florida where there has been more problem loans and prices have dropped most. In these markets most of the loans were not bought by Fannie or Freddie but were “private” mortgages sold by Wall Street firms to private investors.

The current Obama refinance program will not help those loans. However watch this spot as future amendments to this requirement are very possible as the administration is bending further backwards in their effort of encouraging growth in the credit and real estate sector.

The New York Times recently reported that our banking system is in better shape than most people think, while others have focused on weak economic data. Weak data normally causes money to flow out of stocks and into bonds, which in turn causes drops in home loan rates. However, as our economy begins to turn for the better, rates will rise. If you hesitate now, you WILL pay a higher rate. So don't delay. Call me today for a quick and easy refinance.

Mike 248-860-3555

Though all the details are not out yet the program is slated for release April 1st.

* You can finance up to 105% of your appraised value

* If you did not have PMI on your current loan you will not have PMI on this one.

Yet to be determined:

* Interest Rates. We don't know if they will be slightly higher

One thing is for sure. Lenders will get backed up and it will take longer to close. I suggest getting your paperwork started NOW!

Please spread the word. This could save people a lot of $$$

Mike

248-860-3555

Many have asked me.. How do I know if Fannie owns my mortgage?  Just because you make your payments to Chase or another company does not mean Fannie does not own your mortgage.

Chances are if I did your mortgage, your loan is a Fannie loan.

Here is a link to be sure:

http://www.fanniemae.com/homepath/homeaffordable.jhtml;jsessionid=UBEFGP4LVRAMXJ2FECISFGI

This will be important for you to refinance if you are underwater (owe more than your house is worth).

Call me or email me with the results

Mike

248-860-3555

mortgagemike@comcast.net

Hello;

I hope you are finding some of the information useful. If you do not want to read this information in its entirety, Please take a look at the section I have highlighted under who is eligible for a refinance if you are interested.

I know you may be a little bit overwhelmed and frustrated right now with all the NOISE and confusion about all the new government interventions in the mortgage and housing markets. As a Certified Mortgage Planning Specialist™, I make it a priority to stay updated on developments in the mortgage markets that may impact my clients. I have spent a lot of time reviewing the latest Making Home Affordable government program, and here are some of my observations. If you think this information is useful, please pass it along. Feel free to forward this email to anyone you know that may be impacted!

The Making Home Affordable government program is divided into two parts:

• Modification Program
• Refinance Program

Part 1 - Modification Program

Believe it or not, the details of this program are still being worked out. Despite all the hoopla and fanfare surrounding this program, it remains 100% VOLUNTARY, and mortgage servicers (the companies that actually collect borrowers’ mortgage payments) are not obligated by law to follow these rules and guidelines...YET. Oddly enough, if a financial institution has already received government funding, they are NOT obligated to participate. However, if a financial institution receives new or more government funding in the FUTURE, they WILL be obligated to participate.

In other words, the rules are still a bit sketchy and nobody really knows who will participate and how it will all work from a practical perspective. Most of what you read and hear about in the media will most likely be speculation at this point. In a nutshell, the program has three elements:

• The government is offering financial incentives to mortgage servicers who modify loans for borrowers.
• The government is offering financial reimbursement to investors if they allow servicers to modify loans and then take a hit on the borrower’s re-default if the property declines in value after the loan modification
• The government is offering financial incentives to borrowers who modify their loans and make their new payments on time

Vacation homes and investment properties don’t qualify for the program; only primary residences are eligible. Only borrowers who have experienced some type of financial hardship can qualify. In other words, you will need to document that your financial situation is worse now than it was at the time that you originally got the loan. Your income needs to have gone down, and/or your expenses need to have gone up. Click on this link if you want to see if you qualify for at least the minimum requirements:

HUhttp://www.financialstability.gov/makinghomeaffordable/modification_eligibility.htmlU

Remember, even if you do qualify under these minimum requirements, your servicer (the company where you send your payments) might not be participating in the program just yet.

Part 2 - Refinance Program

Here’s how it works:

• You need to be current on your mortgage payments (no late payments in the last 12 months)
• Your mortgage balance cannot exceed 105% of the current value of your home
• Your mortgage needs to be owned or guaranteed by Fannie Mae or Freddie Mac

Based on current market conditions, this might make sense for you if:

• You have an adjustable rate, interest only, or balloon mortgage that you want to convert into a fixed rate; or,
• You have a fixed rate mortgage where the interest rate is greater than 6%. In fact, contact me even if your rate is as low as 5.5%. I’ll put you into my rate watch program and let you know when rates get to the point where you would benefit by refinancing.

Other Recent Developments

There have been many other recent developments in the markets, as well as new government legislation. Here are just a few recent items that may impact you or someone you know:

• Home improvement tax credit
• First-time home buyer tax credit
• Reverse mortgages for home purchase transactions (age 62 or older)
• Suspension of required minimum distributions for certain retirement accounts (age 70 ½ or older)

Let me know if you’d like to discuss any of these items in further detail.

Conclusion

I know that all the NOISE you are hearing about the mortgage industry and government interventions can be distracting and confusing. That’s why I’m here for you! As a Certified Mortgage Planning Specialist™, my role is to help you make sense of all the chaos and confusion in the market, so that you can make smarter mortgage and home buying choices. Please send me an email or give me a call so that we can discuss how these and other recent developments may impact you and your situation!

Thanks,

Mike 248-860-3555

Interest Rates:

We have seen a nice move in mortgage backed securities in the last few days.  What this means is rates came down a little. It has been very difficult for rates to fall and almost impossible for them to maintain the levels when they do fall.

The fall in the stock market has been driving the rates lower. As investors are using the flight to quality.  However investors may start putting money back into the stock market at these low levels. If the stock market rebounds rates will go up.

If you are considering refinancing please call me, because what is here today may not be here tomorrow.

Obamo refi:

You may have seen on the news that a new program is out. Let me first start by saying it is technically out. The lender just received the info on it and have to retool their systems to accept them. The bugs should be worked out within a few weeks.

Here is what I have gathered on this program:

* if you are upside down on your loan you can refinance up to 105% of the appraised value.

* If you had PMI on your 1st loan you will have it on this one.

* Your current loan must be a Fannie Mae loan.

* The tricky part is lenders have not priced these loans. I am expecting them to increase the rate on them.

Once more information comes out I will keep you posted.

** In the near future we may be piloting a program where we can streamline refinance your loan WITHOUT an appraisal.

Thanks,

Mike

248-860-3555

Commentary from Larry Baer:

Commentary: I'll skip all the rhetoric and cut right to the chase - the direction of mortgage interest rates is currently being directly dictated by trading activity in the stock markets. As stock prices fall -- mortgage interest rates edge lower -- and as stock prices rally -- mortgage interest rates creep higher.

There is no escaping the fact that so far this year mortgage interest rates have been completely unable to sustain a rally to lower levels without significant "flight-to-quality" support of capital fleeing the stock markets in search of a safe harbor. My personal opinion is that the DJIA is poised to initiate one more down-leg into the low-6,000's range (I am looking for this price target to potentially be achieved before the end of the month). If my assessment proves accurate, the bottom in the DJIA will likely be completely confirmed by June and before Labor Day stock prices will be engaged in a slow but steady climb to higher levels. If I'm anywhere close to right with these projections (granted, that has yet to be seen) the greatest mortgage financing opportunity in a generation is now available -- to those with enough foresight to recognize it.

So if you know of anyone that needs to refinance have them call me now.  Lenders are taking weeks to underwrite loans so it is best to have the loan all set up and ready to go if the rates move lower. It will be a small window so don't let your friends and family miss out.

Mike

248-860-3555

The Treasury Department has moved at record speed to implement one piece of the new American Recovery and Reinvestment Act of 2009 Act aka the stimulus act.

The Department and the Internal Revenue Service which will manage it announced on Wednesday that forms and regulations are already in place for homebuyers who wish to claim the first-time credit enabled under the act.

The credit is available to homebuyers who purchase a home before December 1 of this year.  In an effort to make the effects of the credit felt quickly in the economy, homebuyers can claim the credit either on their 2009 tax return or immediately on the 2008 return due in April.

The tax credit represents 10 percent of the purchase price of a home up to a maximum of $8,000 or $4,000 for married taxpayers filing separate returns.   The $7,500 credit that was authorized under earlier legislation last year was actually a 15 year loan; the new tax credit does not have to be repaid by the homeowner under ordinary circumstances.

The credit does have to be repaid if the homeowner sells the home in less than 36 months or if the home ceases to be his principal residence during that time.

Rates seem to be having a hard time coming down. Maybe now that the stimulus bill is done we can see them inch lower.

Fannie may is kicking around a streamline refinance with out an appraisal. Even in declining markets like Michigan. If rates come down this could be a good thing.

My solution to the housing mess is this:

Take the tax credit of $7,500 or what ever it will be and allow buyers to use it for their down payment and closing costs. Most buyers do not have the funds to get into a house so it is of no help for them to wait a year to get that tax credit. If they could use the money now, the inventory of homes would go down.

A new program just came out this week which will allow you to buy a foreclosure with 5%, no pmi and no appraisal. 10% if it will be an investment.

If you know if anyone in need of mortgage financing please have them call me.

Mike

248-860-3555

FNMA finally announced that they will allow appraisal waivers effective April 9, 2009!

Read that again as this is especially important for Michigan homeowners who's houses have little to no equity or are upside down!  

Your home's value won't stop you from taking advantage of historically low rates or from getting out from under an adjustable rate mortgage.

We'll have to run your application data through FNMA's automated underwriting system (called Desktop Underwriter or DU for short) and get the proper response.

Closing costs & escrows will be allowed to be rolled into the mortgage amount, so you won't have to come out of pocket with anything but our $50 application fee.

This won't go into effect until April 9, but call me ASAP to get your application going so we can move quickly soon after that date.  I anticipate the whole approval and underwriting system getting backed up, so let's get started NOW and get ahead of everyone else:)

Please refer me to your family, friends, neighbors and coworkers, so they can take advantage of this opportunity also!  As of September 30, 2008 over almost half the financed properties in Michigan were basically upside down. 

This is a fantastic opportunity, don't let anyone you care about miss out on it:)

You can read the entire announcement here: https://www.efanniemae.com/sf/guides/duguides/pdf/current/rndodu71aprupd.pdf

Mike

248-860-3555

Yes rates have come down dramatically. At one point last week the zero point 30 yr rate hit 4.5%.  They have since backed up to levels around 5.25%

They have hovered at 5% for a while.

Please be careful of advertising. It is common for mortgage brokers and bankers to advertise a rate they can not deliver.  They just want to make the phones ring. Once you call you will be told the rates just went up but are expected to come back down, or you have to have a 800 score with a loan amount of $400,000. Or they may flat out lie to you and take your application and hope the rates come down before you close.

Any way be careful.  It is usually a good practice to do business with someone you trust and that will be honest with you. When you call on an advertisement that person does not care about you. If you blow your supposed lock they don't care. Sure they would have liked for it to close for their commission but they don't have a relationship to be ruined.

I take my job very seriously. I work soley off of referrals. So I look out for my customers best interests. I want that customer to refer me to others and I want the person that referred me to that customer to look good.

I have the ability to shop several lenders to find the best rates. If I can't find the rate you were quoted or read in the paper it does not exist. There are no magic mortgage brokers out there.  All lenders price from Fannie Mae or Freddie Mac mortgage backed securities. So most lenders should be very close in price and rate. The only variable is the salesperson.

I can also obtain the best pricing because I am my own cost center. Which means I am responsible for my own overhead.  I do not have any overhead! Most loan officers are on a 50% split with their brokers. I am not. So I can cut when they can not.

In a nutshell please call me if you see outrageous rates. Usually it is a scam or does not exist.

Happy Holidays,

Mike

248-860-3555

There has been a lot of talk about the fed lowering interest rates to 4.5%.

I think it is worth noting that James Lockhart, the director of the Federal Housing Finance Agency, the government regulator for Fannie Mae and Freddie Mac, went out of his way in a interview on CNBC this morning to point out that while the government is taking concrete steps to shore up the housing market and reduce mortgage interest rates, there is no set target for how much borrowing costs should be. The "so what" factor here is that mortgage interest rates will move to levels market participants, those with actual "skin-in-the-game" believe appropriate - not to levels an unnamed "source" whispers into the ear of the media. I'm not suggesting it wasn't nice to have the media talking up the mortgage business for a change - I just think those that are expecting the government will target and achieve a given note rate (say 4.5%) under fair and open market conditions (not a market influenced by a special and specific government bond program) run a high risk of being disappointed.

I would really love to see rates hit 4.5% and if they do I will be the first to tell you.

I certainly don't want to rain on anybody's parade here - but there are a couple of things I think you ought to consider in order to put this story into perspective. The Treasury Department already has authority to buy billions of dollars of mortgage-backed securities - it has yet to use that authority to any large degree. Does additional purchase authority suddenly create a storm of mortgage-backed security purchase activity that didn't exist before? How much additional buying power is necessary to push 30-year fixed-rate mortgage-backed securities down to 4.5%? The Federal Reserve announced plans to buy $500 billion of mortgage-backed securities from Fannie and Freddie on Monday - which did cause rates to spike lower - for a couple of hours - before mortgage interest rates finished flat to slightly higher through this morning.

As I write, 30-year fixed rate mortgages in most of the country are trading at or near levels last experienced in June 2003 - when they touched 5.25%. It is unlikely any coordinated effort by the government to push 30-year mortgage interest rates to 4.5% or lower will occur until at least January 20^th - there's probably too much "political hay" to be made by the majority party to make this event happen any earlier.

Last but not least, in my 17-years of mortgage lending I've never seen mortgage interest rates sustain a dramatic move to lower levels when Uncle Sam is dumping huge amounts of supply into the credit markets. Current estimates indicate Uncle Sam has an immediate borrowing need that is multiples of his previous all-time record.

So in a nutshell, we're talking about a program that doesn't even exist, that has no qualifying parameters, no timeline for implementation if it actually takes form and that will - at best - offer a note rate that is roughly 50 basis-points less than is immediately available in the market today.

I hate these "two in the bush versus one in the hand" dilemmas - don't you?

Just my take on the market

Mike

 248-860-3555 

In a roller coaster day today interest rates were all over the place.

If you are over 6% it may be an ideal time to refinance.  As always I will run the numbers for you to make sure it makes sense. In many cases we can do a true no cost (except for an appraisal) loan for you.

If it does not make sense we can set a target rate and monitor it to see if it becomes available in the near future.

** Please note, with the current economic conditions we have to be aware of how much the homes will appraise for. We have lost a ton of value and even though the rate might work you may be in a PMI situation.  Once you call me I can have an appraiser do a free comp out for us so we don't waste your money.

* Those of you with an FHA or VA loan do not have to worry about getting an appraisal.  We can do a streamline refinace.

* Please share this with your friends and coworkers. Remember when you refinance you miss a payment. With the holidays around the corner that could really help people out.

** Also remember my loan modification service. I will help those in trouble and I will not collect and $ unless the modification is a success.

Have a great Turkey day!  Go Lions! (not really-1st pick looks good)

Mike

248-860-3555

Remember this is not mortgage rates that were cut. Normally what happens when they cut is Mortgage rates go up. The stock market rallys and investors take money out of mortgage backed securitys or bonds.

It usually takes two weeks for mortgage rates to come back down. Let see what happens.  After all this a real crazy time right now.

I will keep you posted.

One bright spot in the news this morning is indications that the FDIC and the Treasury Department are working closely to create a loan guarantee program that would serve as an incentive for mortgage investors to modify existing home loans. Shelia Bair, the chairperson on the Federal Deposit Insurance Corporation told a Senate Banking Committee this morning that the government should establish standards for loan modifications and provide guarantees for loans meeting those standards. “By doing so, unaffordable loans could be converted into loans that are sustainable over the long term,” Bair said. Bair’s position represents the opinion I have heard from a number of my readers – more needs to be done to address the root problem of home foreclosures.

A government loan modification program of some sort will likely be hammered out within the next two months and that will help hundreds of thousands of homeowners retain their properties – and by extension it will help reduce the downward pressure on the home values in many areas.

Call me if you know of anyone in need of a loan modification.

Mike

248-860-3555

Central bankers around the globe put their money down and gave the financial roulette wheel another big spin this morning. In an unscheduled announcement made as investors were reaching their offices early this morning, the Federal Reserve announced it cut the benchmark fed funds rate by 50 basis-points to 1.5%. Central banks in China, Britain, Canada, Sweden, Switzerland as well as the European Central Bank also cut rates in a rare coordinated move.

Fed Chairman Bernanke and his fellow central bankers unanimously approved the rate change. In the statement announced the monetary policy decision, the Fed indicated it is ready to move again whenever warranted by saying, “The committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and prices stability.”

The initial reaction in the world’s stock markets to this “surprise” coordinated move by central bankers of some the largest industrialized countries was positive for a brief and shining moment – before selling pressures return and pushed market averages notably lower. Everything the Fed is doing will eventually have a positive effect – but it will all take some time. Stock holders are currently in no mood to be patient – not for one hour much less multiple months -- and so the selling pressure continues.

On the other hand, fixed-income investors (those that buy and hold notes, bonds and mortgage-backed securities) live in the future – not in the present. The closest their radars focus is three to six months out. These market participants see a completely different picture – where massive amounts of liquidity in the banking system, fed fund rate cuts, government sponsored loan guarantee and buy-back programs of every description will ultimately lead to renewed confidence in the banking system. Once confidence in the banking system is restored resurgent business confidence will blossom, followed in short order by consumer confidence and a soaring demand for capital as everybody realizes that America is on sale – and opportunities to acquire assets of every kind at a discount abound.

Completely overshadowed by news of the coordinated international short-term rate cuts the National Association of Realtors announced earlier today that pending sales of existing homes (based on contracts signed) unexpected jumped 7.4% in August – well above economists forecast for a drop of 1.8%. The August gain was the highest level this index has achieved in over a year. In tandem with this report the Mortgage Bankers of America said its seasonally adjusted index of mortgage application activity rose by 2.2% in the week ended October 3^rd – after falling 23.0% in the prior week. Applications for loan refinancings rose 0.9% while requests for home purchases were up 4.3% during the period.

Sometimes it is far better to be OUT of the market … and perhaps wind up wishing you were IN … rather than being IN the market and wishing to heck you were OUT. In my judgment, this is one of those times.

 A swing and a miss. The House of Representatives have rejected a financial bailout package intended to return the nation’s banking sector to fiscal health over the intermediate term. Skeptics in both parties questioned the need for a bailout while others had severe reservations about the ultimate success of the plan.

Immediately after the news hit the wires fear ripped through the stock markets, pushing the Dow down 700 points at one moment – the largest single intraday decline ever. The massive amount of capital washed out of stocks -- flowed directly into Treasury obligations and mortgage-backed securities. This capital flow will likely continue until the logjam of ideas surrounding what, if anything should be done in terms of reviving a financial market rescue mission is cleared.

Expect continued strong volatility in the mortgage market.

I will try and keep you up to date on this issue

This a commentary from Larry Bauer:

Like trauma room doctors – Treasury Secretary Paulson, Fed Chairman Bernanke together with support from most members of Congress are scrambling to revive the critically ill global financial system.

It looks like one of the treatment regimes being considered will strongly resemble a critical care technique from a bygone era. Treasury Secretary Paulson is finding growing support for the development of a government entity similar to the Resolution Trust Corporation (RTC) which proved useful in helping resolve the savings and loans crisis of the 1980s. Rather than hold and sell the assets of failed banks as the RTC did, the new entity would purchase toxic loans at a steep discount from solvent financial institutions -- and then eventually sell back those repackaged loans into the market through an auction.

This is not an all bad idea – especially if the majority of these loans are collateralized by an asset such as a single-family residence. Here’s a look at the general idea. Because the original loan from the bank to borrower was not paid back – the bank must write the loan off as a complete loss – at least until the underlying collateral is sold and the true dimension of the loss can be calculated. For instance, a $100,000 loan secured by the “sticks-and-bricks” of a single family home goes bad – and the bank is forced to take a gross $100,000 ding to its balance sheet. Just because the bank took the write-down it certainly doesn’t mean the value of the home has fallen to zero. If someone would simply buy the foreclosed home from the bank at $100,000 – the bank would generally be out nothing more than legal and administrative fees. No big deal.

The proverbial “rub” here is that many lenders have suffered more losses in their loan portfolio than their cash position can support – rendering many lenders insolvent and leaving many more hanging on the edge of financial disaster. The quick sale of the collateral (the homes) is too slow to stave off possible collapse and the short-term credit markets have frozen-up – cutting off any opportunity these institutions might have to borrow themselves out of trouble.

Treasury Secretary Paulson is proposing the government create a new entity, funded with hundreds of billions of dollars of taxpayer money, which will buy these troubled loans from still solvent institutions at a discounted price, and then eventually sell them back into the market through an auction process. The lenders off-load bad loans from their balance sheets for cash, immediately improving their financial viability. If the bank sells a $100,000 loan to the government for, say -- $45,000 – the lender’s actual loss on the original transaction is now only $55,000.

The new government entity will ultimately auction bundles of these troubled loans they bought from the banks and other institutions. In this example, the government stands a good chance of getting its money-back under this structure – especially if auction participants (investors) believe the value of the underlying collateral– the residential properties themselves – are undervalued in terms of their then current fair-market value.

The strong rally in the stock market is a solid indication that capital market participants around the world believe this plan has a good chance of sharply diminishing -- if not resolving -- the massive credit crunch that has held the global banking system hostage over the past 18 months.

This structure will take time to develop, and it will require a mammoth bi-partisan effort on the part of Congress to enact. In the interim, mortgage interest rates will likely continue to swing wildly as all of the resources of the government are focused on stopping the seizures in the global banking systems --before focusing specifically on the current level of mortgage interest rates.

Looking ahead to next week, headline news events and trading action in the stock market will exert far more influence over the direction of mortgage interest rates than will the upcoming release of the August Existing Home Sales (Wednesday, 9/24) and August New Home Sales (Thursday, 9/25) sales figures.

The financial markets are going thru a rough time now.  Lehman Brothers is going bankrupt, Merrill Lynch is being bought by Bank of America (who recently bought Countrywide) and AIG is on the brink of failure.  More institutions are bound to go under.

That is the bad news. The media hypes that is next to impossible to get a mortgage. That is simply not true. Sure if you want to borrow more than $417,000 you will have some issues. But for most people loan programs such as FHA will allow you to obtain financing.  Fha will allow as low as a 580 credit score and maximum loan amount up to $300,000 (higher in high cost areas).

Home prices are at record lows and interest rates are falling.  The financial market collapse could actually benefit you. We will probably never see such low prices and interest rates again.  Are we at the bottom? Probably not. But we are much closer to the bottom than we are the top. If you bought now will you kick yourself in 5 years?  I doubt it. Chances are your friends will think you were a genius. A market timer. Chances are you will have some good equity in your home.

What frustrates me is when I talk to past customers that for one reason or another refinanced with another lender.  The fact the left me bothers me but many of them were conned into an option arm or some other unhealthy loan.  I talk to the customer now and it frustrates me because I can't help them.

I think many of you will agree that I give a fair product. I look out for you. I have done only a handful of sub-prime loan and not that many ARMs.  Just remember if it sounds too good to be true it probably is.

I appreciate all the referrals you have been giving me. Keep them coming and I will continue to take good care of them.

Stay Calm - this too shall pass

Mike

The debut will go on. Is this a good thing or bad.

I am still digesting what it all means. It does appear that we needed this to help stabilize the mortgage market. It is yet to be seen if we will see a big drop in interest rates.

If we looked at historical prices for rates we should be a whole point lower than we are now. The instability of Fannie and Freddie has kept rates higher.

My questions are:

* Will rates fall?

* Will loans for Jumbo and Construction loans come back?

* Is this the beginning of the end of the credit crunch? (I don't think so)

* Will foreclosures stop? (NO)

* Will the mortgage lending become too political?

* Will this create more of a secondary market and allow banks to lend more money? ( I think it will take more time,)

You have to remember, that the only loans available now are Freddie Mac, Fannie Mae and FHA/VA.  The government stepping in will not bring back more mortgage products. What we need is for the large banks to bring back some of the programs they did away with due to Wall Street not buying them.

If Wall Street comes back on board and will buy Jumbo loans etc then we have a chance to pull out of this.

I am very interested to see how this will shake out. I will keep you posted to see if this will help or if it will be like every other program the government has rolled out.

Please share your thoughts, I am very interested in what you think!

Mike

Today is Wednesday August 20th, 2008.  As many of you know the real estate and mortgage industrys are in a bit of a turmoil.

The recent housing bill eliminated the DPA programs. These programs allowed buyers to get into a home for very little down.  In an already depressed housing market. This should really hurt home sales going forward.

I can see why the government did not like these programs (all money coming from the seller) but the timing of eliminating them is terrible. We need all the activity we can get.

Another part of the housing bill gives 1st time homebuyers a $7,500 tax credit. In which they have to pay back.  This is great but why can't they give them $7,500 to go towards their down payment and closing costs. That would really get homes sold.

I will try to keep this update.

Mike