Marc's Mortgage Matter's

A thief broke into the local police station and stole all the toilets and urinals, leaving no clues. A spokesperson was quoted as saying, "We have absolutely nothing to go on."

The MBA should make a t-shirt for the next conference that says, "The beatings will continue until morale improves." Many loan originators wonder if this is statement sums up "the new normal", especially with flood insurance. Sometimes one just has to utter, "What the *&^%$?" The House of Representatives has passed another temporary extension of the National Flood Insurance Program until Sept. 30, and now it up to the Senate. Reauthorization provisions have been added (legislation on jobless benefits, tax breaks, etc.) that were twice voted down in the Senate. This is the fourth time in the past year that the program has been interrupted due to the failure of Congress to reauthorize it for an extended period, like for 5 years instead of 5 months. For those who recently purchased a home - you know what its like to get flood insurance these days! ;/

I don't like thinking about where it is "finding" the money, but the Federal government plans on doling out $1.5 billion to five states (AZ, CA, FL, MI, NV) and another $600 million to another 5 (NC, SC, RI, OH, and OR) to help the unemployed and the underwater who owe more than their homes are worth. The Treasury Department okayed the money to subsidize homeowners' monthly mortgage payments and to reduce their principal. Some of the funds will also go to paying off second liens or facilitating short sales in coming months. Stable housing prices versus moral hazard? Critics are quick to point out that in spite of the billions spent by the Federal government to prop up the housing market, it hasn't worked. This latest batch of funds will be administered by state housing finance agencies, not mortgage companies, and involve the use of matching funds from loan servicers (details TBA). But servicers are not anxious to write down principal, and Freddie & Fannie generally don't allow principal reduction on their loans. Nope, not applicable to any of us in NY or NJ!

Wednsday's FOMC's announcement was not earth-shattering. "The economic recovery is proceeding and the labor market is improving gradually. Household spending is increasing but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit...Housing starts remain at a depressed level." The FOMC maintained the target range for the federal funds rate (read: prime rate) at 0 to 1/4 percent and continued to utilize the "extended period" language when characterizing the length of time that "exceptionally low levels of the federal funds rate" will be warranted. So the pace of the economic recovery is faltering - low rates should continue.

There was a time when ultra-low mortgage rates would create a cascade of activity, 40-point headlines, and a bombardment of lender phones -- a crush of volume that would overwhelm lender staffs. While rates did ease to new record lows this week, and there has been some indication of an uptick in refinancing activity, the response is muted, at best.

Aside from these being new "technical" lows -- really, just a few basis points down from already-record-low territory -- the fact is that there just isn't enough pent-up demand to produce much new activity. At best, the 'window of refinancing opportunity' has merely widened a little bit any may now include folks presently holding mortgages with rates in the 5.75% range or so. That, with lower values, tight credit and income issues has many in a tizzy. 

The path to homeownership is a twisty one these days, and even a potential homebuyer with a strong desire may run afoul of any number of obstacles. Aside from low interest rates, which are the initial attraction, those who wish to purchase homes of course need to have jobs, be able to fully document their income and assets, and come up with at least a 3.5% downpayment plus money for closing costs, required reserves and any needed MI. They need to find properties they can afford in desirable locations and be able to execute transactions in their desired time frames. They also need acceptable credit and credit scores. A twist that has, and is voiding so many loans these days.

They also need at least a modicum of confidence about their ability to manage what can be an immense commitment. That confidence is built around solid prospects for today and tomorrow plus a belief in the value of value of homeownership -- as well as confidence in the value of a house as an investment and a place to live. All of these items must align to a greater or lesser degree in order to be successful, and aligning them today can be quite difficult.

Rates may slip again next week, although that should be no surprise at this point. Any group of solid reports, especially employment, would stop and reverse any decline. Refi or buy if you can, at rates probably as low as your parents -- or even grandparents -- got.


His request approved, the CNN News photographer quickly used a cell phone to call the local airport to charter a flight. He was told a twin-engine plane would be waiting for him at the airport.
Arriving at the airfield, he spotted a plane warming up outside a hanger. He jumped in with his bag, slammed the door shut, and shouted, "Let's go!"

The pilot taxied out, swung the plane into the wind and took off.
Once in the air, the photographer instructed the pilot, "Fly over the valley and make low passes so I can take pictures of the fires on the hillsides."
"Why?" asked the pilot.
"Because I'm a photographer for CNN," he responded, "and I need to get some close up shots."
The pilot was strangely silent for a moment, finally he stammered, "So, what you're telling me, is...You're NOT my flight instructor?"