Wednesday, November 26, 2008

Feds change mind AGAIN now will buy bank assets

Okay so this sounds like a childrens playground sage we know, but the Feds now say they WILL buy the troubled assets with the TARP (trouble assets relief program) funds that they were given.

News on this development and the speed with which they announced they will try to put it onto the street drove mortgage rate strikingly low today. The market saw 5.25% par pricing on a 30 year fixed interest rate today! This is excellent news for everyone and shows just how quickly the market would be able to recover if only people would get off their overpaid behinds and make things happen.

With pricing flirting with the bottom range of 5% one has to wonder if it's too much to ask Santa for a mortgage note for christmas that start with a 4!

Wednesday, November 12, 2008

Feds change mind and WON'T buy troubled assets

So the single most important factor that the FED gave in passing the $750B bailout was to buy troubled mortgage assets off banks and sell them later for a profit.

Today they reversed the entire principle the bailout was based on!

Just when we think it's gotten so insanely crazy that there is no human way possible to get any more wild...

Now they claim they want to invest in credit card companies (they made American Express a bank so that they can claim easier money from the Gov) and auto companies. Incredible is all we can say about today's revelations.

"I believe we have taken the necessary steps to prevent a broad systemic event. Both at home and around the world, we have already seen signs of improvement," Paulson said in a speech at the Treasury Department.

This is the same guy that said at the very beginning that the economic troubles were confined to the subprime loan market only. He read that one a tad bid wrong when it spread to the entire US economy and eventually the world!

As an industry insider I can tell you that banks ARE NOT lending and have only further tightened their restrictions on borrowers. We look forward to seeing how this news will play out with interest rates, lending restrictions, and the overall health of the economy.

Monday, November 10, 2008

Obama Economic Policy that affects you part I


Well we told you we would show you the plans of whoever was elected in laymens terms. this is part I of our look at the policies of our new President Elect Barack Obama.

The problem:
According to a report from Credit Suisse, 6.5 million loans were expected to fall into foreclosure over the next five years. That's based on home prices dropping 10% in 2008 and 5% in 2009, before rising 3% in future years.

The Center for Responsible Lending estimated in August that nearly 2.2 million foreclosures would occur due to defaults on subprime loans from late 2008 through the end of 2009. More than 40 million homes in neighborhoods surrounding those foreclosures would suffer price declines as a result, causing a $352 billion total decline in property values, or an average $8,667 per home.

All those extra homes on the market drives prices down which cripples lenders assets on the books and further aggrivates our economic woes.


Hope for Homeowners (H4H). This plan went into effect in October 2007 and it aims to allow a new lender to issue a government backed mortgage at 90% of the current appriased value. The old lender will have to write off the difference. This may be acceptable to them since they would loose even more if they had to foreclose.

Foreclosure Mortatorium - Obama has called for a few month stop on all foreclosures. During this time banks will be forced to look at homeowners that are attempting to make payments in good faith but need a modificaiton to the loan to help them keep the house.

Bankruptcy reform - Obama has called for bankruptcy reform that would allow a judge to modify a loan if a lender refuses to do so.

Regulations such as:
  • Crackdown on mortgage fraud - crack down on mortgage fraud, create new criminal penalties for mortgage professionals guilty of fraud and require "industry insiders" to report suspicious activity
  • Better loan disclosure - provide potential borrowers with a "Homeowner Obligation Made Explicit," or HOME, score which would give them an easier, standardized way to compare mortgage products and compare the full costs of the loans.
  • Universal mortgage credit - His proposed 10% universal mortgage credit for homeowners who don't itemize their taxes could provide an average of $500 to 10 million homeowners, most of whom earn less than $50,000 per year
  • Improve housing affordability. Obama has proposed creating an Affordable Housing Trust Fund to create "thousands" of new affordable housing units annually
  • Build sustainable communities.

We hope this helps understand the stated goals of our new President. What is clear is that this is going to be his top priority when he gets into office. The above mentioned changes along with an aggressive stimulus package is expected early next year.

As always we'll keep you in the loop. Look for part II of his financial policies coming soon...

Sunday, November 9, 2008

Weekly Poll Results for Nov 7th

The poll question was What would you do if in foreclosure?

50% of respondents said they would chain themselves to the home and call the police
50% of respondents said they would get a job or do whatever else it takes to keep the home.

Both answers make it clear that people DO NOT want to walk away from their homes and let them foreclose.

These are troubling economic times and many people are upside down on their homes and facing ARM resets. People in this situation need to immediatly contact their lenders and ask about a loan modification. This will allow the lender to review their financial situation and possibly reduce the interest rate or principle balance in order to lower the total monthly payment for the homeowner.

This is a solid tool that all homeowners in trouble should be pursuing right now with their lenders.

We look forward to interviewing one of our readers weekly about your poll selections so please don't forget to leave a comment when you vote on the weekly poll.

Monday, November 3, 2008

Happy November... lets hope it's better than October!

We hope everyone have a safe and fun filled Halloween this year. With five children we always have a big event with halloween and it's a great time. This year was no exception.

We are tracking rate improvements this morning thankfully. Last month ended pretty brutally with mortgage interest rates on the rise even in the face of huge stock market volatility and a Fed Fund rate that saw itself cut down to 1%!

The rest of this year looks to promise even more volatility and surprises. We expect interest rates to continue to their roller coaster ride in the 5.5% to 6.5% range through the end of the year. Consumer sentiment is down, jobs are down, we expect to see the bleakest holiday shoppping season in recent history, and it's still tougher than a wrestling a greased pig to get qualified for a loan. On top of that we get to pick our next President tomorrow.

We hope you stay tuned as we keep you up to date with the inner workings with simple explanations of this historic financial and political environment we are living in. Don't forget to vote on the poll of the week and also leave a comment if you wish to be interviewed!

Saturday, November 1, 2008

Mortgage Company Goes Green

Anyone who has ever bought a home knows that the process involves mountains of paperwork. There are applications, disclosures, bank statements, pay stubs, and a never ending supply of other forms that require signatures when buying a home. In today’s day and age mortgage companies are finding it both cost effective and environmentally friendly to attempt to decrease the amount of hard copy paper that has to be transferred around and “go green”
There are a number of ways that Florida based Five Stars Mortgage has managed to do this.

The first is right at the beginning with the loan application. Through the online loan application a potential homeowner can input all of the necessary information and avoid having to use hard copy papers for the loan application. This allows the information to be automatically delivered to a loan officer that can immediately follow up with and finish the application process for a client.
Once the application is taken the loan officer can email a client all of the necessary loan paperwork that would require their signatures. There is a new product in the industry that is accepted by banks and lenders nationwide that allows for e-signature of the online documents. This avoids so much paperwork alone that if every mortgage company in America used it we could put a significant impact on the paper use in our country. The signed digital documents are delivered back to the lender without having to have printed signed, and then faxed back to the mortgage company where they would have had to once again print the documents.

These digitally signed documents can then be uploaded into bank websites where they can be underwritten without having to print them out once again. Now at this point you have saved from having to manually print this same set of documents three separate times. This is hundreds of sheets of paper you have saved in one loan scenario!

Once the file is being underwritten by the bank the client can access up to date status of their loans by logging into the Five Stars Mortgage and entering their tracking number in the loan tracker field. Through this interface each client can track the status of their loan in real time 24-7. In addition florida mortgage companies can update all of the other parties involved such as appraisers, realtors, inspectors, and loan officers through online tracking software and email. This allows everyone to stay in direct communication on a regular basis and ensures the loan moves faster through the entire process. Ask any realtor and they will tell you that communication during the loan process is invaluable to helping them do their jobs.

Finally the closing day comes and the client will have to manually sign ONE time documents that can be dispersed to all appropriate parties. In the near future we believe that even the final closing will involve a digital signature that will be used to send back to the lender, and even recorded digitally at the courthouse to have a complete paperless loan transaction.

These are just some of the ways that Five Stars Mortgage and the rest of the mortgage industry are attempting to do their part to responsibly manage their environmental footprint. Staying ahead of the curve with technology is the best way to benefit home buyers and other partners in the industry during these trying economic times. We look forward to the financial recover of the nation but until then every little bit helps!