Marc's Mortgage Matter's

Scientists have released a report on the adverse effects of different alcoholic beverages have on the organs of the human body.
Vodka + Ice........ Damages the kidney!
Rum + Ice........... Damages the liver!
Whisky + Ice...... Damages the heart!
Gin + Ice.............Damages the brain!

Conclusion: It seems that ice ruins everything!

I have accepted a position as a mortgage banker with Chicago Bancorp, a national mortgage lender this past week. I am now positioned myself in a safe, secure and recognized force in mortgage financing in these tumultuous times. They will now underwrite all loans for me associated with owner occupied and investment residential financing, and I'm confident a better move could not have been made. Contact me for further details on this move or how it might help you.

A California homeowner is suing the mortgage servicing unit of Morgan Stanley, claiming the company had no intention of permanently modifying her home loan payments to an affordable amount despite having her make a slew of trial payments under a federal program designed to help homeowners avoid foreclosure. Cool move!

A brief explanation of private mortgage insurance: "Usually PMI covers mortgage payments for periods of between 12 months and 5 years, though terms between three and five years are increasingly difficult to find. Insurance usually kicks in when the borrower is unable to meet their mortgage payment obligations because of sickness, injury or unemployment - MI does not cover fraud." A National Accounts rep for an MI company clarified, "What you describe is more like 'Involuntary Unemployment Insurance' which does kick in if a borrower loses their job. Some MI companies offer 'IUI.' PMI (Private Mtg. Insurance) protects lenders if a mortgage loan goes into default on LTVs above 80%. By helping mitigate the lender's risk, borrowers can get into homes with lower down payments."

Last week Reuters ran a story saying, "A proposed rule requiring a minimum 20% down payment on mortgages that lenders could then sell to investors without keeping some of the risk on their books might prevent some potential borrowers from getting a loan, a top U.S. housing official said. While the rule ‘is designed to create a class of loans that have a lower likelihood of default, in its proposed definition it has the potential to exclude a number of buyers,’ Acting Federal Housing Administration Commissioner Bob Ryan said in prepared testimony." Is this late-breaking news to any mortgage bankers, Realtors, title company, or MI folks? I hope not. But maybe it will attract the notice of Senators & Congressman, who many in the industry believe don’t know the difference between a mortgage and a deed of trust.*

(*Ok, just so I don’t have to write this next week, the basic difference between the two is in the number of parties involved, the state, and the foreclosure process. )

Bank of America announced it is eliminating 1,500 jobs in its mortgage origination business (by closing 100 regional fulfillment centers) and shifting another 350 jobs from creating new home loans to handling troubled existing loans. Per the WSJ article, "This is just the latest move by (BofA) to get away from creating new home loans and instead turn its focus on the massive pile of bad home loans it has, many of which it got from the purchase of Countrywide Financial...Through a series of announcements the bank has now moved about 4,000 employees from the creating side to the troubled mortgage side. Executives have also been rotated." Well, well better later then never!

Chicago Bancorp will be buying a Kansas bank in order to "break into banking as regulatory controls over non-bank mortgage lenders have increased in the wake of the housing-led recession." The company, which originated over $1 billion in 2010, secured approval from the U.S. Office of Thrift Supervision to purchase Overland Park, Kan.-based Generations Bank. "The Calk brothers hope to shift the mortgage business they do at Chicago Bancorp to Generations Bank. The reason: Their regulatory costs have soared as states have instituted separate licensing programs for sales reps. A federal banking charter allows banks to operate under a single regulator." KansasBank

Here is one trend that Realtors and mortgage originators should pay attention to, and that is household formation. Yes, as a nation the population in the US is steadily increasing, which in the past led to an increase in the number of households. But at present, household formation has been slowed by the recession. There are a large number of adults who have either moved back in with their parents because they can no longer maintain the expense of their own household, or are not even moving out due to economic uncertainty. A loan agent wrote to me, "In the recent past many kids got down payment gifts from their parents, but now the parent's wealth has gone down, and a portion of my clients don't feel comfortable giving their kids any money to move them out of the house."

Owning a home is a subset of forming a household (which includes rentals), and most analysts believe that several years ago home was driven up artificially high by political mandates, bad mortgage lending, artificially low rates, or any number of other factors. The homeownership rate has been inching back down for a variety of reasons, but the number of households is not showing the same dramatic decline since people do, indeed, need a place to live. And many in the business believe that encouraging more investor loans would be an improvement rather than the government concentrating on keeping people in homes with mortgage modifications. Clearing the existing inventory, and the inventory of about-to-be foreclosures, is a necessary condition to improve the housing market.

In 1960, our total national debt was $286 billion. Today we’d run that up in about two months.

Did you know that all-time home run champ Henry Aaron never hit more than 47 home runs in a single season? In fact, he only hit 40 or more in eight of his 23 seasons. Aaron is proof that consistency is so important in success.

Given the evidence, there's little doubt that inflation is returning to some degree. Rising prices in the economy tend to foster higher mortgage interest rates, which would be most unwelcome in light of today's pathetic housing market.
These developing price pressures -- even worries about widespread inflation -- aren't yet sufficient to cause an economy-wide rise in prices. There is still plenty of "resource lack" in the form of un- and under-employed people, and factories are hardly operating at levels which would produce an inflation-creating bottleneck in production.
Still, we do have inflation. The question is, is the nature of the inflation we are experiencing more likely to expand to other areas of the economy and further lifting interest rates, or rather such as to cause an economic slowdown... which would tend to see interest rates ease? It is a question that the markets seem to be pondering right now, and at least mortgage interest rates are in a holding pattern as a result.

In the document, which covered the period up to April 4, the Fed did say that "economic activity generally continued to improve since the last report." While generally modest in nature, "most Districts stated that gains were widespread across sectors" with manufacturing leading the way upward.

After last month's downturn, probably due to the shock of the earthquake/tsunami/nuclear tragedy in Japan, consumer moods have begun to improve just a tad. The weekly Bloomberg Consumer Comfort Index moved a little higher during the week ending April 10, rising 1.5 points to land as minus 43 for the period. Also, the interim value of the University of Michigan's Consumer Sentiment index nudged 2.1 points higher to stand at 69.6 for the first half of April. This suggests a full-month recovery of at least some of the 10-point from which happened in March.
The economy continues to grow, but at what looks to be a somewhat weakened pace. Inflation continues to grow, at what seems to be a quickening pace. The nature of these selective price increases is likely (at least so far) to produce a tempering effect on economic growth... and interest rates remain pretty stable as a result. At this moment, it isn't clear if the underlying economic trend is strong enough just yet to produce the kind of growth needed to allow price concerns to spread, not is it clear that prices have or will rise so quickly as to overwhelm the positive forward momentum which has come only with extraordinary effort.

For the moment, at least, we'll bet on the side of the equation which says $4/gallon gasoline and food prices which continue to step higher month after month are sufficient to trim a fair bit from the economic sales as we move toward summer. We saw some of this inflationary movie just a couple of years ago, where oil end energy prices became infused into the economy for a time, contributing in its own way to the severe recession which followed. This is a milder case, at least for the moment.
So which trend will win? Inflation, faster growth and higher interest rates? Inflation, slower growth and softer interest rates? We won't know until it gets here, but absent another economic catastrophe, don't count on significantly lower mortgage rates, even if they may dip from time to time.

A father walks into a restaurant with his young son. He gives the young boy 3 nickels to play with to keep him occupied.
Suddenly, the boy starts choking, going blue in the face.
The father realizes the boy has swallowed the nickels and starts slapping him on the back. The boy coughs up 2 of the nickels, but keeps choking.
Looking at his son, the father is panicking, shouting for help.
A well-dressed, attractive, and serious looking woman in a blue business suit is sitting at the coffee bar reading a newspaper and sipping a cup of coffee.
At the sound of the commotion, she looks up, puts her coffee cup down, neatly folds the newspaper and places it on the counter, gets up from her seat and makes her way, unhurried, across the restaurant. Reaching the boy, the woman carefully drops his pants; takes hold of the boy's' "privates" and starts to squeeze and twist, gently at first and then ever so firmly. After a few seconds the boy convulses violently and coughs up the last nickel, which the woman deftly catches in her free hand. Releasing the boy's testicles, the woman hands the nickel to the father and walks back to her seat at the coffee bar without saying a word.
As soon as he is sure that his son has suffered no ill effects, the father rushes over to the woman and starts thanking her saying, "I've never seen anybody do anything like that before, it was fantastic. Are you a doctor?"
"No," the woman replied, "I'm with Internal Revenue Service".