Marc's Mortgage Matter's

Let me start off by saying that i do not believe the rumor that the international olympic committee has taken back skier lindsey vonn's gold medal, and instead awarded it to president barack obama, announcing that no one has ever gone downhill faster than he has.

If, as a kid, I had ever been caught cheating my younger cousin during Monopoly, I would have been in big trouble. Perhaps I could have countered, "I deny all allegations of wrongdoing and any liability under the Monopoly rules. But I will give him some money to avoid the additional time, hassle, and uncertainty associated with arguing about it."  For Countrywide, a judge has approved a $600 million settlement with shareholders. "Countrywide denies all allegations of wrongdoing and any liability under the federal securities laws," said Shirley Norton, a spokeswoman for Bank of America. "We agreed to the settlement to avoid the additional expense and uncertainty associated with continued litigation." BofA will pony up $600 million, and KPMG, Countrywide's accounting firm, will pay $24 million. The settlement does not end the legal problems, since the Securities and Exchange Commission brought civil fraud charges against Angelo Mozilo and the two other former executives.

The first week of the month has rolled around again, and although it's a brand-new month it seems we have the same old economic story we've had for the past few: Slow growth, no jobs and low mortgage rates. Not only are jobs hard to come by, remaining employed is difficult, too. During the week ending July 31, another 479,000 new applications for unemployment assistance were filed, the highest level of the last couple of months and much closer to the top of 2010's range than to the bottom.

As is to be expected in such a climate, the unemployment rate remains high. In July, the official rate of unemployment was an unchanged 9.5%, while the economy shed another 131,000 jobs last month, almost all from the public sector. The loss of jobs over the last two months has offset all the gains from January through March, leaving only strong Census hiring in May and June as positives for the year. Private payrolls expanded by 71,000 during the month and there is little by way of an upsurge there, even though it was the best showing in the past three months.

With weak employment comes weak gains in personal income... well, none to be exact. Consumer moods continue to darken. The weekly ABC News/Washington Post poll covering Consumer Comfort fell back again during the week ending August 1, landing at minus-50 for the week and matching its 2010 lows. The again-stumbling economy is clearly having an effect on consumer moods which contributes to more conservative spending patterns, even if a household does have money to spend.

And so it goes. What might spark cheer, and promote growth? Jobs, which are hard to find and will remain so for some time yet to come. That said, we (and many others) long ago identified jobs and underwater mortgages as the two most pressing problems in today's economy. A rumor floated around this week that the administration was readying a plan to offer mortgage principal reduction for certain underwater homeowners. That rumor was quickly quashed -- "a bailout for main street" was one characterization -- but some serious minds need to start considering how to best approach this problem before too much more time passes.

As has been the case for months, mortgage rates are great. If you can get access to the market, it is a great time to buy or refinance. If you're thinking of buying a home with a small down payment, or if you have a middling credit score, you should know that the FHA announced this week forthcoming changes which will affect how much you'll need to put down and how much your mortgage insurance will cost you. Given the gap in underwriting standards between the Conventional/Conforming market and the FHA-backed one, these are relatively minor tweaks, but tightening nonetheless. Contact me for more individual details.

A cowboy from Laramie, Wyoming, walked into a bank in New York City and asked for the loan officer. He told the loan officer that he was going to Paris for an international rodeo for two weeks and needed to borrow $5,000 and that he was not a depositor of the bank.
The bank officer told him that the bank would need some form of security for the loan, so the cowboy handed over the keys to a new Ferrari. The car was parked on the street in front of the bank. The Cowboy produced the title and everything checked out. The loan officer agreed to hold the car as collateral for the loan and apologized for having to charge 12% interest.

Later, the bank's president and its officers all enjoyed a good laugh at the cowboy from Wyoming for using a $250,000 Ferrari as collateral for a $5,000 loan. An employee of the bank then drove the Ferrari into the bank's private underground garage and parked it.

Two weeks later, the cowboy returned, repaid the $5,000 and the interest of $23.07.

The loan officer said, "Sir, we are very happy to have had your business, and this transaction has worked out very nicely, but we are a little puzzled. While you were away, we checked you out on Dunn & Bradstreet and found that you are a highly sophisticated investor and multimillionaire with real estate and financial interests all over the world. Your investments include a large number of wind turbines around Laramie. What puzzles us is - why would you bother to borrow $5,000?"

The good 'ole Wyoming boy replied, "Where else in New York City can I park my car for two weeks for only $23.07 and expect it to be there when I return?"