Marc's Mortgage Matter's

One patient came in and said, "Doctor, I have a serious memory problem." The doctor asked, "When did it start?" The man replied, "When did what start?"

That line is short and to the point. Generally speaking, markets like news when it is short and to the point - borrowers are different than traders, who are different than investors, who are different than analysts, who are different than economists. So when the Fed Chairman uses the double adjective "unusually uncertain" to describe the economic outlook, one's opinion, and how one reacts to that quote from last week's testimony, will be different. There is no question that rates are great, and much better than many had forecast for this time of year. But if the Federal Reserve doesn't know what the US economy is going to do in the near (or far) future, what are small business owners, builders, etc., supposed to do?

Someone told me, "There are three stages in a man's life: Tri-Weekly, Try Weekly and Try Weakly."   At this point, banks are not shut down three times a week - yet - but only once a week and on Friday's. Another handful of banks were shut down on Friday, pushing the number over 100 for the 2nd straight year. The assets and liabilities of Home Valley Bank (OR) were assumed by South Valley Bank & Trust (OR), CrescentBank & Trust (OR) went to Renasant Bank (MS), Sterling Bank (FL) is now part of Iberiabank (LA), SouthwestUSA Bank (NV) is now part of Plaza Bank (CA), Williamsburg First National Bank (SC) was incorporated into First Citizens Bank & Trust Co. (SC), Community Security Bank (MN) is now part of Roundbank (MN), and (catching my breath) Thunder Bank (KS) became part of Bennington State Bank (also of KS).

A processor wrote to me and said, "Scientists believe that to make a pound of honey, it takes 50,000 miles of bee flight. Now it seems that it takes that many steps in doing a mortgage, with the difference being that bees have had millions of years to adapt."

Some originators moved into offering mortgage relief services. Most are honest business people, but woe to those who aren't - and unfortunately these are the ones that garner the most publicity. Federal regulators (the FTC) have banned eight individuals and companies from selling mortgage-relief services, settling charges that they used false advertising to deceive homeowners facing foreclosure by paying $29 million in fees that they collected from clients. Some of the companies used names that deceived borrowers into believing the firms were participating in the Obama administration's $75 billion mortgage modification effort, known as "Making Home Affordable." Steven Oscherowitz (Federal Loan Modification Law Center), Loss Mitigation Services Inc., Direct Lender, Dean Shafer, Marion Anthony "Tony" Perry, Bernadette Perry, Salvatore and Nicholas Puglia (Hope Now Modifications and Hope Now Financial Services Corp.) were all either banned from the industry and/or required to pay large penalties.

When I think "mortgages" I think of frozen pizza. And vice versa. So I was excited to hear that Chase plans to open new full-service bank branches (including business loans) in 22 Albertsons stores in Southern and Central California this year. Several are already functioning, and Chase plans to add a total of 800 branches in the state by year end. That is a heckuva lot of branches. (800 is also, coincidentally, the number of homes in California where the borrower still has equity.)

Many states (including NY) don't have budgets yet...across the nation, however, the West Virginia Housing Development Fund announced a new mortgage program where 280 first time home buyer families can qualify for 3.5%, 30-year fixed-rate loans with a zero percent down payment. Financing for the program comes from the sale of $35 million in bonds and a special bond refunding. The program covers new or existing houses, duplexes, townhouses and new doublewide mobile/manufactured homes. It does not cover new or used single- and used doublewide homes. Applications will be taken at banks, mortgage brokers and credit unions.

At one point, long ago in the initial stages of the crisis, it was suggested that the Fed or Treasury was seeking to engineer mortgage rates to about 4.5%, which would save the housing market from ruin. As well, we were led to believe that the stimulus plan would serve to cap the unemployment rate at about 8.5%. Neither has turned out to be correct, as we now have mortgage rates in the 4's indeed (thanks to on-going and emerging crises) and the housing market is still weak and troubled, and an 8.5% unemployment rate would be a marked improvement relative to where we stand today.

Low mortgage rates produce benefit only to those who can access them -- namely people with incomes, good credit, equity and more. While some can, many more cannot, because they have no job to produce the income needed to participate in today's markets. Untold additional numbers have little or no equity in their homes and cannot recast their balance sheets through conventional refinancing means.

These two issues -- jobs and underwater homeowners -- are the problems which most need addressing if we are to produce a faster economic recovery. Grandiose health care and financial market overhaul mean very little relative to the problems so many face today, and the regulatory and tax uncertainty inherent in such plans are more than likely serving as additional deterrents to to the kind of hiring which would produce a better economic climate.

Until that better economic climate shows, we'll continue to have low mortgage rates and high unemployment, and continue in this stagnant holding pattern.

How Adam Got Eve:

Adam was hanging around the Garden of Eden feeling very lonely.
So, God asked him, "What's wrong with you?"
Adam replied that he didn't have anyone to talk to.
God said that He was going to make Adam a companion and that it would be a woman.
He said, "This pretty lady will gather food for you, she will cook for you, and when you discover clothing, she will wash them for you. She will always agree with every decision you make and she will not nag you, and will always be the first to admit she was wrong when you've had a disagreement. She will praise you! She will bear your children. And never ask you to get up in the middle of the night to take care of them. She will NEVER have a headache and will freely give you love and passion whenever you need it."
Adam asked God, "What will a woman like this cost?"
"An arm and a leg."
Then Adam asked, "What can I get for a rib?"

The rest is history.....