Marc's Mortgage Matter's

It is good to know that the jumbo market is alive and well. Alive and well to the point of a residential construction loan to Tiger Woods for $54.5 million on Jupiter Island in Florida, which he agreed to pay back by January 2016. Of course, folks like pediatricians are having trouble finding an 80% loan for a few million, as are self-employed borrowers like architects, CPA's, or sail makers. But there is hope! (No, I don't know the lender or the other terms.) 

The first social security cards were issued in late 1936, and as most people know the first three numbers are a geographic code. Enough of trivia - I read this doozer from another mortgage originator about applying income under a falsified number to the new card in order to qualify for a loan. "So, my mother went on her first job interview in New York City after having lived in small towns her whole life. When she was filling out the job application, she was so embarrassed because she didn't know her social security number that she made one up. That made up SSN has been her social security number to this day." "As odd as your first paragraph sounds, the law does accommodate people like this. If you worked with an illegal social security card for 10 years and then are given a green card with a valid social security cared you can petition the Social Security Administration to transfer credit for all taxes paid under the illegal card to the now legal card." "When our office started using the 4506, a loan officer said, 'I hear there's a new rule that we can't use white out on tax returns anymore.'" "I once asked a client for his social security number and he responded, 'Which one?'"

Here in the US, the unemployment rate is estimated by a household survey called the Current Population Survey, conducted monthly by the Federal Bureau of Labor Statistics. The unemployment rate is calculated by dividing the number of unemployed persons by the size of the workforce. An unemployed person is defined as a person not employed but actively seeking work. The size of the workforce is defined as those employed plus those unemployed.

Who is the largest private employer in the United States? Wal-Mart! 2.1 million of us work there. In the public sector, the US Government employs about 2% of the nation's workforce. The US Postal Service is the largest civilian employer, with about 600,000 folks. Private sector job growth continues to be the key to a sustainable economic recovery, especially if we expect to see much of an improvement in housing prices. Economists continue to believe the probability of a double-dip recession remains low, but are cautious. Heading into this employment data, most believe that if private sector job creation does not improve (or at least hold-up) in the near term, there will be significant ramifications on the economic horizon ranging from the outcome of the November mid-term elections to the likelihood that the Fed proceeds with an additional dose of quantitative easing.


Economic growth has weakened to the point where we now have 1.6% GDP readings as bookends to the year-old recovery. After the deep recession, any positive growth readings are of course welcome, but the very muted pace of growth in the second quarter of 2010 isn't warm enough to feel much different than the recession did.

Addressing the audience at the annual Economic Symposium in Jackson Hole, Wyoming, Federal Reserve Chair Ben Bernanke detailed the Fed's disappointment with the present rate of growth, and stock markets were cheered that he took pains to express both optimism for the coming year and that the Fed still has tools it can employ to ward off deflation or even a double-dip recession. Frankly, what else could he say?

Just as 1.6% growth is insufficient to produce much economic heat, cheap mortgage rates alone are insufficient to produce recovery in the housing market. Along with the broad economic slowdown, the hangover from the homebuyer tax credit "party" has become increasingly apparent. Arguments about its benefits or drawbacks aside, there can be no doubt that the credit has produced distortion in the housing market. The advancement of already weak demand into the spring of this year created a minor peak of sorts, and we are now deep into the valley on the other side, with (hopefully) no place to go but up in the coming months. Given the summer economic swoon and a lack of job growth needed to foment demand, a rebound will probably come later rather than sooner.

There is perhaps a little irony in that among the worst housing markets in memory comes what might be the best refinancing opportunity ever... provided you can make it over the hurdles needed to access today's fantastic mortgage rates. Unfortunately, too few borrowers can, and while refinancing activity has picked up to a fair degree, the aggregate amount of activity so far is small relative to other refi booms and boomlets. With about 11 million borrowers underwater to some degree, there are a lot of people who might wish to refinance but cannot, and probably many millions more who lack the steady income needed to qualify.

We seem to be in a vicious little trap at the moment in a number of ways. There's not enough job growth to produce the kind of consumer spending which can produce more and more self-sustaining growth. There aren't more jobs available because there isn't enough final demand to produce them. Due to that lack of growth and a lack of inflation, we have fantastic rates for borrowers who either lack the confidence or income to take advantage of them to buy homes, and we have millions of folks who would love access to those rates but cannot qualify to borrow... because they have no jobs, or because others have no jobs to produce the kind of growth which would serve to create demand to firm home prices... and around we go.

Two beggars, one a Catholic, one is Jewish, are in Vatican City. They are sitting side-by-side on a street in near St. Peters Cathedral. One beggar has a large cross in front of him; the other beggar, the Star of David.
Many people walk by and look at both beggars, but only put money into the hat of the beggar sitting behind the large cross.
A priest comes by, stops and watches the throngs of people giving money to the beggar behind the large cross while none give money to the beggar behind the Star of David.
Finally, the priest goes over to the beggar behind the Star of David and says, "My poor fellow, don't you understand? This is a Catholic country; this city is the seat of Catholicism, the home of the Pope. People aren't going to give you money if you sit there with a Star of David in front of you, especially when you're sitting beside a beggar who has a large cross. In fact, they would probably give to him just out of spite."
The beggar behind the Star of David listened to the priest, turned to the other beggar with the large cross and said, "Moishe, look who's trying to teach the Goldberg brothers about marketing!"