Marc's Mortgage Matter's

OK - for those asking about Mobile Home loans - please take note....you know the ones with a hitch or axle......

If you pay registration instead of prop taxes your "property" does not qualify.

If you have a luggage rack instead of an attic your "property" does not qualify.

If you have a gas cap instead of a gas meter your "property" does not qualify.

If your bed has a seat belt your "property" does not qualify.

If when you move you jump in the front seat and turn a key your "property" does not qualify.

If your advertise FOR SALE in Auto Trader instead of the MLS your "property" does not qualify.

There you have it all in a nutshell!

“You can sleep in your car, but you can’t drive your house.” Ford lost many billion for 2008, and with the recent run-up in mortgage rates, maybe you can get a car loan at less than 6%. Because it seems that 30-yr conventional fixed-rates are up at the 6% level again, although rates in the low 5’s are attainable, depending on many different issues including credit scores, equity and points. 

OK boys and girls, here is your word of the day: “monopsony”. A monopsony exists where there is only one buyer of a product, as opposed to a “monopoly” where one seller controls the market. Although there is a minor amount of interest by investors in owning securities backed by mortgages, most would agree that at this point the Fed is the primary buyer, and that we are approaching a monopsony, which, like a monopoly, is rarely good. Use that word tonight during Happy Hour.

This week was not a good day for Treasury or mortgage rates, or the housing industry. New-Home Sales fell 14.7% in December, and are down 45% from December 2007! This represents the 5th straight month of declines.  Regardless, the Treasury auctioned off $30 billion of 5-yr notes, and it did not go as well as hoped. At this point the last thing on the Fed’s mind is inflation, and in fact deflation is on the minds of many. Lets hope rates start going back down where they belong ;)

Here's your financial vocabulary lesson for today:

"Liquidity" - When you look at your investments and wet your pants.

Toyota is developing a miniature, environmentally friendly car that is powered entirely by a rechargeable battery. Meanwhile, Detroit is still hard at work on a 6 passenger SUV that runs on rain forest trees and panda blood.

It would appear that the Fed has been the only real buyer of mortgage-backed securities recently. Will that be enough? Unfortunately, as many insiders have seen, mortgages have moved “wider” this week, meaning that mortgage rates are worsening relative to Treasury rates. Although the Fed has tremendous resources, the market is not convinced that mortgages are the place to put its money. And the market is also worried about the supply of Treasury securities that will need to be sold in order to finance this effort. That is why rates this past week went up about a quarter percent (still so darn low) and lenders are being harsh on extensions to boot.

Trammell Crow has died at age 94. He once had interests in nearly 300 million square feet of developed real estate, comprising 8,000 properties in more than 100 cities. His projects, always done with partners, included the Dallas Market Center , the Peachtree Center in Atlanta and the Embarcadero Center in San Francisco , and reached from Kansas City to Hong Kong to Brussels . Both Forbes and The Wall Street Journal had labeled him the largest landlord in the United States .

A Doctor was addressing a large audience:
"The material we put into our stomachs is enough to have killed most of us sitting here, years ago. Red meat is awful. Soft drinks corrode your stomach lining. Chinese food is loaded with MSG. High fat diets can be disastrous, and none of us realizes the long- term harm caused by the germs in our drinking water. But there is one thing that is the most dangerous of all and we all have, or will, eat it. Can anyone here tell me what food it is that causes the most grief and suffering for years after eating it?"

After several seconds of quiet, a 75-year-old man in the front row raised his hand, and softly said, "Wedding Cake."

Whether you spell it cramdown, cram down, cram-down, or CramDown, the subject was in the news last week. Basically Citigroup reached a compromise with lawmakers to allow bankruptcy judges to modify terms of existing mortgages, and industry-wide legislation is probable. Both houses introduced bills allowing bankruptcy judges to permanently reduce mortgage balances to the property's fair value on principal residences, among other measures. Citigroup’s agreement, in addition to addressing existing mortgages and not future loans, permits bankruptcy modifications as long as filers previously contacted their lender in an attempt to secure a loan modification prior to filing (for new filers) or requesting the mortgage be modified in bankruptcy (for existing filers).

The Mortgage Bankers Association, and others, opposes the issue, due to the many issues that are unresolved and the destabilizing affect on the market. The industry’s concerns are well based. Losses from bankruptcy cram downs could be significantly larger than servicer-driven modifications, and the potential for high plan failure rates could further increase losses and charge-offs without stemming foreclosures or accelerating a housing recovery. Bankruptcy filings could double or more, increasing credit card charge-offs. Some fear a massive sell-off that would worsen valuations, threatening further balance sheet write-downs. Although it is believed that less than 1% of existing mortgages would be impacted, industry experts feel that cram-downs lower whole loan valuations. Since mortgage and home equity loans are, on average, 40% of large banks’ loan books, CramDowns of principal would lower that value, hurting bank equity. Home equity loans are in the first loss position in a cramdown scenario, and it is believed that for many borrowers bankruptcy could become a more attractive option, accelerating default rates.

This morning the only news was Jobless Claims. New claims for unemployment benefits last week unexpectedly fell to their lowest level since mid-October, but the number of those remaining on jobless rolls rose to a 26-year high. Initial claims for state unemployment insurance benefits fell 24,000 to 467,000 last week, the Labor Department said, coming well below market expectations for 540,000. It was the lowest reading for initial claims since the week ending Oct. 11 last year, when the figure was at 463,000. Tomorrow, of course, we will see the government’s unemployment figures, which are expected down about 500,000

Rates are still great - most locks are happening at mid to lower 5's - many don't qualify but all in all we seem to have gotten a number of very tough 'n tight loans that seemed going nowhere, approved in the last week. Since we don't know what will happen next week so to say, I advocate locking in and if rates do go lower will renegotiate the rate before the loan closes.

I was explaining to my kids my investment strategy, why money can’t buy happiness, and some basic stock market definitions. Like the following:

BEAR MARKET -- A 6 to 18 month period when the kids get no allowance, the wife gets no jewelry, and the husband gets no “fun”. 
BULL MARKET -- A random market movement causing an investor who mistakes himself for a financial genius.
CASH FLOW-- The movement your money makes as it disappears down the toilet.
FINANCIAL PLANNER -- A guy whose phone has been disconnected.
INSTITUTIONAL INVESTOR -- Former investor who's now locked up in a nuthouse.
MARKET CORRECTION -- The day after you buy stocks.
P/E RATIO -- The percentage of investors wetting their pants as the market keeps crashing.
PROFIT -- An ancient word no longer in use.
STOCK ANALYST -- Idiot who just downgraded your stock.
STOCK SPLIT -- When your ex-wife and her lawyer split your assets equally between themselves.
VALUE INVESTING -- The art of buying low and selling lower.