Marc (Moshe) Preger Mortgage Solutions

Marc's Mortgage Matter's

January 28th, 2012 9:35 PM

I'm passing this on because it worked for me today...

A doctor on TV said in order to have inner peace we should always finish things we start & we all could use more calm in our lives.

So, I looked around my house to find things I'd started & hadn't finished, so I finished off a bottle of Merlot, a bottle of Chardonnay, a bodle of Jin, a butle of wum, tha mainder of Valiuminun peescriptins, an a boks a chocletz.

Yu haf no idr how fablus I feel rite now. Sned this to all who need inner piss. An telum u luvum!..

In last weeks speech President Obama asked for creation of special unit of federal prosecutors to further investigate mortgage lending practices that led to the housing crisis. "This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans." Soon afterward I received this note: "I guess former Senator Dodd, Barney Frank, Bill Clinton, and Andrew Cuomo had better assemble good teams of attorneys. I don't remember who ran the FDIC for the last 8 years but Shelia Bair and Alan Greenspan might need one too!" Obviously the government's housing ownership push to artificial levels a decade ago is well remembered.

Seriously, there were two quotes that caught the interest of those in our business. The first was, ".....responsible homeowners shouldn't have to sit and wait for the housing market to hit bottom to get some relief. That's why I'm sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates. No more red tape. No more runaround from the banks. A small fee on the largest financial institutions will ensure that it won't add to the deficit, and will give banks that were rescued by taxpayers a chance to repay a deficit of trust. Let's never forget: millions of Americans who work hard and play by the rules every day deserve a government and a financial system that do the same. Hmm I've heard that one before - or something like it - have we not? ;/

"The FOMC (FEDS) spoke. "The Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014. The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability."

This FOMC announcement turned some heads, especially if overnight rates stay low for 2-3 more years. (Remember - overnight rates are set by the Fed, longer terms rates like mortgages are set by supply, demand and a slew of other daily matters.) Banks must continue to survive in a low rate, low margin environment for an even longer haul - healthy banks will have to learn to subsist off lower earnings and a sub-optimal return on capital. Watch for them to continue to cut expenses and move business units around, especially with the specter of Basel III hanging over the industry. And the consumer can certainly expect to earn near 0% on, or even pay for, their checking accounts.

A buddy writes ; We were in the Pacific Northwest working with a mutual thrift, and we picked up the Seattle Times at the airport. They have their obituaries on page two! Page two has traditionally been for interesting stories which didn’t quite make it to page one. Obituaries are usually buried pretty deep in another section. Strange.

Did you know that the first video on YouTube was April 12, 2005? It was an eighteen second clip of someone standing in front of the elephants at the San Diego Zoo. Only seven years ago, and the world will never be quite the same.

The lowest interest rates in decades sound enticing enough, but they are often out of borrowers’ reach. Mortgage lenders adjust their rates based on perceptions of risk, so unless you can show you’re a low-risk borrower, you are unlikely to qualify for a rate that matches those seen in all the advertisements or headlines.

The rates quoted by Freddie Mac and others are averages drawn from a variety of financial institutions, and lenders use varied approaches to set them. As its base line, for instance, the Brooklyn Cooperative Federal Credit Union uses rates posted on the Credit Union National Association Web site for New York, according to Daniel Alejandro González, the credit union’s director of lending. Others, like Chase Mortgage, use markers like Treasury yields and agency mortgage-backed securities issued by Fannie Mae.

Consumers who want to try for the lowest rates available need to consider these basic factors.

CREDIT SCORE The ideal borrower has a FICO score of 740 or higher, That puts you in the best place for pricing. According to key players in the mortgage arena, borrowers in New York with scores of 760 to 850 could qualify for an annual percentage rate of 3.95 percent on a $417,000 30-year fixed-rate mortgage, while those with scores of 620 to 639 qualify for 5.53 percent.

POINTS The lowest rates usually are decreased by paying a fee called a point, or 1 percent of the loan amount. “You need to buy points in order to get the best rates at many banks. In Freddie Mac’s weekly survey on mortgage rates, points have averaged 0.7 percent on loans in the last year. Points might make sense depending on your financial situation and how long you expect to stay in a home. A 2-4 family property usually has already a 1 point charge/fee from Fannie Mae or Freddie Mac to consider.

PROPERTY TYPES If you’re buying a duplex or a four-unit building, your rate will almost certainly be higher. Condominiums may also have a rate premium, especially if they are newer or your down payment is below 25 percent. Lenders charge more if you are not planning to live in the home. Commercial properties like apartment buildings have the highest rates, as they are considered riskier.

DOWN PAYMENT borrowers who put down at least 25 percent are more likely to obtain “attractive pricing” . Lenders offer different breaks on rates if equity is higher, so you should ask what is available.

LOAN LENGTH A lot depends on how long you plan to live in a home. If you’re likely to move in a few years, an adjustable-rate loan with a low interest rate fixed for, say, three to five years, and adjusted afterward, might work best. Also, rates on 15-year fixed-rate loans are lower than those on the 30-year — 0.77 percentage points, on average, last year, according to Freddie Mac. Some people may not need a 30-year mortgage, however with rates this low it makes little sense to consider an adjustible (arm) if you have and could get a normal fixed term.

Borrowers may also be able to reduce their mortgage rate when they enter into a “lock-in” agreement with a lender. Lenders typically offer a lower rate for a shorter lock period.

Lenders typically agree not to change an offered interest rate for 45-60 days, but borrowers confident of a quick closing may be willing to accept a 45-day rate guarantee, or even a 30-day lock, in exchange for a small discount, because the transaction’s speed helps the lender reduce its risk.

Borrowers must make sure, too, that they consider the entire cost of a home, looking carefully at monthly payment calculations. A third of homeownership costs are in addition to the mortgage — among them property taxes, insurance, maintenance and repairs.

The Federal Reserve kicked off its new strategy of clearer communications at the close of January's Open Market Committee Meeting on Wednesday afternoon. With just a few words, plus some charts, the Fed now expects to keep interest rates "extraordinarily low" for a period up to 18 months longer than the mid-2013 previously in place. Also for the first time, the Fed more officially revealed more explicitly that it will use an inflation target to help control monetary policy.

Armed with this news, and with Fed Chair Bernanke commenting at his news conference afterward that a QE3 is certainly possible sometime this year, markets turned. Mortgage rates were rising somewhat in the early part of the week, goosed by warmer economic news, but reversed course to some degree. Why? If nothing else, it reinforces the idea that the Fed expects the economy to continue to experience sub-par growth which will require additional assistance, and that price pressures are low and will likely remain that way for some time.

The Fed's assessment of the economy over the next few quarters are no doubt darker than the conditions we are experiencing. The effects of a slowdown in Europe have yet to be fully felt here, which may trim exports to a measurable degree, and the economy here is by no means firing on all cylinders and is less able to endure any kind of shock. That being the case, of course the Fed would say that they stand ready to do more, but all the while, its a safe bet that they would rather not. The value of the Fed's previous actions is not nil, but it is limited, as is the Fed's ability to manage issues better done from the fiscal side rather then the monetary. That is to say, low interest rates are great for some things, but they only go so far.

It should be noted that there are those for whom low rates are a problem, like savers, pension funds and others. The longer-term commitment for low rates may force some rates even lower than they already are, which is very close to zero for many short-term accounts. If banks can get 0.25% for parking excess reserves with the Fed, perhaps they might consider time deposits which return something. It's not going to happen, but is a thought.

Arguably, the broad economy is better served by re-igniting and re-inflating housing, and this is the path we are set upon, for at least the foreseeable future. Refinance if you can, purchase a new (or used, or additional) home if you are inclined, but there doesn't seem to be much of a sense of urgency... for the moment. We are perhaps more optimistic than others that the housing market will strengthen in 2012.

In a one-sentence quip in his State of the Union speech, President Obama alluded to a new administration refinance plan. We've read plenty of speculation, but it may be a hybrid plan based upon a streamlined refinance concept detailed in an economic paper revealed last fall, coupled with elements of the FHA Short-Refi concept. It is claimed to be aimed at non-GSE mortgages (jumbos, etc) but there has been no official plan revealed. If it comes, we'll review it and critique as necessary. That's a big "if".

In the meanwhile, we have a full plate of economic data due out next week. We'll be looking for the Fed's Senior Loan Office survey detailing lending standards, ISM reports, worker productivity, the employment report and more. Rates have settled after initially being upset by the Obama announcement, soothed no doubt by the Fed's comforting hand. We would expect that this week's minor blip will be erased and we'll settle back to just about record lows, again.

An economics professor at a local college made a statement that he had never failed a single student before, but had recently failed an entire class. That class had insisted that Obama's socialism worked and that no one would be poor and no one would be rich, a great equalizer.
The professor then said, "OK, we will have an experiment in this class on Obama's plan". All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A.... (substituting grades for dollars - something closer to home and more readily understood by all).
After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little..
The second test average was a D! No one was happy. When the 3rd test rolled around, the average was an F. As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else. To their great surprise, ALL FAILED and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed. It could not be any simpler than that.
Remember, there IS a test coming up. The 2012 elections.

These are possibly the 5 best sentences you'll ever read and all applicable to this experiment:
1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.
2. What one person receives without working for, another person must work for without receiving.
3. The government cannot give to anybody anything that the government does not first take from somebody else.
4. You cannot multiply wealth by dividing it!
5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation. (Thanks SD!)

A good old Alabama boy won a bass boat in a raffle drawing.
He brought it home and his wife looks at him and says, "What you gonna do with that. There ain't no water deep enough to float a boat within 100 miles of here."
He says, "I won it and I'm a-gonna keep it."
His brother came over to visit several days later. He sees the wife and asks where his brother is.
She says, "He's out there in his bass boat", pointing to the field behind the house.
The brother heads out behind the house and sees his brother in the middle of a big field sitting in a bass boat with a fishing rod in his hand.
He yells out to him, "What are you doin'?"
His brother replies, "I'm fishin'. What does it look like I'm a doin'?"
His brother yells, "It's people like you that give people from Alabama a bad name, makin' everybody think we're stupid. If I could swim, I'd come out there and whip your +++!"

Posted by Marc (Moshe) Preger on January 28th, 2012 9:35 PMPost a Comment (0)