Marc's Mortgage Matter's

At the last company Holiday party the loan agents lined up on one side of the room and the underwriters on the other side. The loan agents throw fire cracker at the underwriters...and the underwriters lit them and threw them back. 

Don't forget that the end of the first time home buyer tax credit is in sight, and I have heard nothing about any extensions. Borrowers need to be in contract by April 30 and close by June 30. Also the FHA upfront MIP is increasing from 1.75% to 2.25% with case numbers issued after April 5.

Last week the House Financial Services Committee held a hearing to discuss the future of housing finance, trying to start answering questions about what the new system should do. Many people spoke, although Treasury Secretary Tim Geithner was the headline witness with 17 pages of testimony. "It's important as we think about the future to make sure we retain what was good in this system." But Geithner said that the old system, would not be re-created and that Fannie and Freddie's status as shareholder-owned companies with the implicit backing of taxpayers would end. Basically, Fannie Mae and Freddie Mac won't be allowed to return to a pre-crisis structure that rewarded shareholders with big profits for years but ultimately saddled taxpayers with massive losses. Look for this to be a long and involved process.

For example, even if the market is under stress, mortgage credit should be available and distributed on an efficient basis to a wide range of borrowers, including those with low and moderate incomes, to support the purchase of homes they can afford. Affordable housing options should be available, and borrowers should have access to easily understood mortgage products. The mortgage finance system should not contribute to systemic risk or overly increase interconnectedness from the failure of any one institution. If there is government support provided, such as a guarantee, it should earn an appropriate return for taxpayers, ensure that private sector gains and profits do not come at the expense of public losses, and the role and risks assumed must be clear and transparent to all market participants and the American people. Regulations should ensure capital adequacy throughout the mortgage finance chain, enforce strict underwriting standards, and protect borrowers from unfair, abusive or deceptive practices.

The official announcement by the Federal Government was Friday, about funding & requiring lenders to temporarily slash or eliminate monthly mortgage payments for many borrowers who are unemployed. Banks and other lenders would have to reduce the payments to no more than 31% of a borrower's income, which would typically be the amount of unemployment insurance, for three to six months. In some cases, administration officials said, a lender could allow a borrower to skip payments altogether. And for borrowers who owe more than their home is worth, the US government, with its big budget surplus (right?) will be offering financial incentives for the first time to lenders to cut the loan balances of such distressed homeowners.


Are the people who are responsible about making their payments subsidizing those that don't? (Like the Greek debt issue in Europe, perhaps?) That is a huge argument of course, but those who are still current on their mortgages could get the chance to refinance on better terms into loans backed by the Federal Housing Administration. Officials said the new initiatives will take effect over the next six months and be funded out of $50 billion previously allocated for foreclosure relief in the emergency bailout program for the financial system. No new taxpayer funds will be needed, the officials said. We'll be watching this new twist in next few weeks, and see what it really turns into.

Mortgage market armageddon, or non-event? In just three business days, we'll start to find out, as the Federal Reserve ends its program of purchasing mortgage-backed securities to keep interest rates low. We don't expect there to be a huge change in mortgage interest rates. However, at least some firming should be expected as we move away from the safe, steady arms of the Fed and into the wilds of (at least partially) privately-driven markets, where demand for yield and concerns about fiscal policy and inflation inform investment decisions.

Some of the rise in rates this week might be as a result of the signing of the landmark health care reform bill, whose profound effects on the economy in years to come will produce huge (though not yet known) amounts of spending and taxation. Promises of ultimate savings from the program are as unknowable as the total cost of the new entitlement program, and investors are rightly concerned about high debt levels and budget deficits as far as the eye can see -- and that's without considering the coming Social Security crisis. At present, risks are such around the world that US-issued debt is still considered the safest, but endless commitments to debt service in the coming years (and the effects of those on economic growth) and worries about inflating our way out of debt are surely at the forefront of investor concerns at the moment.

(Warning: I try to give equal time to various political views.)

In honor of the 44th President of the United States, Baskin-Robbins Ice Cream has introduced a new flavor:  " Barocky Road."

Barocky Road is a blend of half vanilla, half chocolate, and surrounded by nuts and flakes.

The vanilla portion of the mix is not openly advertised and usually denied as an ingredient.

The nuts and flakes are all very bitter and hard to swallow.
The cost is $100 per scoop.
When purchased it will be presented to you in a large beautiful cone, but after you pay for it, the ice cream is taken away and then given to the person in line behind you at no charge.
You are left with an empty wallet and no change, holding an empty cone with no hope of getting any ice cream.