| Mortgage Minute Newsletter From Sam Thompson, your mortgage advisor. August 2007- Vol 1, Issue 10
|
| In This Issue |
| More on Mortgage Market Tightening! |
| Good Advice from Warren Buffet. |
| Weekly Tip - Take a General Contractor Out to Look at Your Listings! |
| Weekly Market Mortgage Rate Lock Commentary |
|
Quick Links
|
| Dear Sam, |
Mortgage
Market Tightening! The mortgage industry, driven mostly by the
mortgage-backed securities investor markets, is tightening up on
programs in a big way so your buyers that have not gotten registered in a loan with a lender yet might find out that they no longer meet the guidelines. Yikes!!
With this tightening, the rules are changing and underwriting guidelines are not going to remain the same.
Not just subprime lenders impacted by this new tightening!
Brokers are getting hit the hardest because lenders
are pulling back programs that they sell to them for their own
protection. That is why I am very thankful to be with a great LENDER
right now but we are not completely immune from this either!!
Call me with anyone that you have in your pipeline
this week so we can register them into a loan program for their
protection and yours!
With the continuing tightening, the longer they
wait, the less likely they are going to be able to buy that house you
have been showing them...
Get them locked in quick if you have them!
Sam Thompson
PHH Mortgage
Senior Mortgage Advisor 843-230-7929
|
|
More on the Mortgage Market Tightening...
|
|
Investors are now getting smarter and maybe a little too cautious! The graph above says it all. Over the last 10 years, investors have allowed more leeway from the more conservative mortgage lending practices of the past in picking up investments through risker loans that are not performing like they were supposed to due to current market conditions. Investors were just responding to the market because more and more people are living beyond their means and for many, they found out that they were not able to make their mortgage payments, which hurt the investors' profits in lower performing bond rates. "Hello!" Because of these revelations, investors are now getting out fast and investing elsewhere and subsequently, causing mortgage companies that sprouted up over night to go out of business! This has now spilled over to the "Alt-A" market, the so called "exotic" loans like the Pay Option ARM. They also cover most Stated Income loans through No-Doc loans. All of these carry a higher risk and higher interest rates and worse terms in general. There are many factors that drive Mortgage Interest Rates as they are based on Mortgage Backed Securities (MBS), specifically the Bond market. Economic reports, news, emotions, etc. all play a role in driving mortgage rates. The Subprime woes are contributing to the rising interest rates we have been seeing, and will likely continue seeing in the near future at least. Why? The lenders failing these days are not helping Bonds overall. Standard & Poors and Moody's are either downgrading or already downgraded Mortgage Backed Securities as they relate to subprime loans. Since a portion of these loans get bundled in with normal A-Paper loans and sold to investors, the whole Mortgage Bond Market suffers from the perceived increased risk. In other words, mortgage rates go higher and risk factors tighten based on the news. Because
of this, lenders have been racing to change underwriting guidelines so
that investors continue to buy the loans they originate on the
secondary market and many lenders that used to do subprime loans do not
anymore because nobody is buying them. These same lenders are
tightening standards on A-Paper loans as well, so the effects are seen
in harder to close loans, even when they used to make sense. Now, politicians and regulatory agencies are trying to "protect" the market and are asking for stricter requirements. This will make it harder and longer to get a loan, particular for those who could really benefit from those exotic loans. So, with this tightening and elimination of programs, expect more mortgage companies to fold and programs to get tougher to get buyers approved and closed. And, expect conditions to be harder to clear because loans files have to be spotless and well-documented much more so than in any time in history!
This
is a very important point. If you think conditions are hard to clear
now, wait until these changes fully kick in. This is a strong selling
point to stick with us because we have the best processors and systems
in the country for clearing conditions!
Last week, I sent you a flyer that a competitor, National City Mortgage, sent out that explains their tightening and they explained that much of the industry is doing the same. Read about their changes...
Just what we needed, right? Let's make it harder to pre-approve borrowers in a slower market... Hopefully, this does not get out of hand but the pendulum usually swings out too far before it settles back to a better, neutral position.
And, early last week I sent you an article from a USA Today article that explained about that American Home Mortgage was facing bankruptcy and this is happening more and more with lenders and brokers that have been heavily involved in the subprime market or over-extended in portfolio (their capital) loans that investors are not willing to buy from them which prohibits these lenders from doing business in the future. USA TODAY - AMERICAN HOME MORTGAGE ARTICLE
Since late 2006, 109 mortgage companies have "imploded", meaning that they may have filed for bankruptcy protection, temporary but open-ended halting of major operations, or a "firesale" acquisition with many others ailing, financially because of this down turn. Check out this site.
My advice for buyers and buyers' agents is to get a backup lender (me!) for your clients ASAP so your deals do not die on the vine especially if they are getting a stated loan or if they have a marginal file and get them registered into a loan program before the program they wanted ceases to exist. Just
because they are "pre-qualified" or "pre-approved" now does not mean
they are still going to get the loan with these changes in the wind. The sooner they register in a loan program, the better, which protects them and you!
For more information about Mortgage Backed Securites (MBS) click on the below: And, if YOU were thinking about doing an exotic refi, call me and let's get it going fast. We love Refis!!
If we all took Warren Buffet's advice, we wouldn't be in this mess! |
|
Good advice from Warren Buffet |
 There was a one hour interview on CNBC with Warren Buffet, the second richest man who has donated $31 billion to charity. Here are some very interesting aspects of his life:
Bill Gates, the world's richest man met him for the first time
only 5 years ago. Bill Gates did not think he had anything in common
with Warren Buffet so he had scheduled his meeting only for half hour.
But when Gates met him, the meeting lasted for ten hours and Bill Gates
became a devotee of Warren Buffet. Warren Buffet does not carry a cell
phone, nor has a computer on his desk.
His advice to young people: "Stay away from credit cards and invest in yourself and remember:
|
|
Weekly Tip - Take a GC out to look at your listings.
|
|
Take a general contractor around to look at your listings and pick
their brain about things that the house could use to make it shine!
Then, start including a section in your presentations and in promotions
for all of your listings with ideas that buyers can do with the home to
really make it special. Make sure to include the estimated cost
(provided by your contractor including his name too so he gets a
referral for the effort) AND the expected increased value to their home
if they do each thing.
Use your
expertise (with your general contractor's assistance) to help your
buyers see the potential to help you sell more houses! AND to show
your sellers how hard you are going to work to sell their home for them
too by explaining your program at the listing presentation!
This information can really impress your sellers and prospective
buyers and soon, you are going to have a reputation as being a creative
thinker. AND, you are going to establish a great relationship with
a general contractor that can translate into referrals too!
Remember, 2 heads are better than one but eventually, you are
going to be able to do this on your own like many experienced realtors
do!
AND, call me if I can help and remember me for our
contruction rehab program that we might be able to get your buyers into
as well.
|
| Weekly Mortgage Market Commentary | ||||||||
| Don't let the financial markets squash your clients and your transactions! Stay informed by reading my new daily "Daily Rate Lock Commentary" or just call me to find out what is going on! If you want to be included in this distribution, just call or email me. Remember, knowledge is power and the more educated you are in your industry, the higher quality buyers you are going to attract and that means easier closings, bigger houses and more money in your "hip national bank!" And since rates are still climbing, call us to get your clients in our 90 day rate protection as soon as possible!  Rate Lock Advisory - Sunday Jul. 29th
There are several important reports scheduled for release this week that are likely to affect mortgage pricing. The first important release scheduled for the week is June's Personal Income and Outlays data Tuesday morning, which brings us three pieces of data. The Income & Spending report helps us measure consumer ability to spend and current spending habits. If it shows sizable increases, bond selling could lead to higher mortgage rates. Current forecasts are calling for an increase of 0.5% in income and an increase of 0.1% in spending. The second report of the day is the 2nd Quarter Employment Cost Index (ECI) that measures employers' costs for wages and benefits. It is considered to be an important measurement of wage inflation and can have a pretty big impact on the bond market and mortgage rates. If it shows a rapid increase, raising inflation concerns, the bond market may drop and mortgage rates rise. It is expected to reveal an increase of 1.0%. The third piece of news Tuesday is the Conference Board's Consumer Confidence Index (CCI). This index measures consumer sentiment, giving us an idea of consumer willingness to spend. This is important because consumer spending makes up two-thirds of the U.S. economy. If the CCI reading is weaker than expected, we may see bond prices rise and mortgage rates drop Tuesday. Current forecasts are calling for a reading of 105.0, which would be a higher number than June's reading. Wednesday's only important report comes from the Institute for Supply Management (ISM), who will post their manufacturing index for July. This index measures manufacturer sentiment by surveying trade executives about business conditions during the previous month. A reading above 50.0 means that more surveyed executives felt that business improved than those who said it had worsened. This month's survey is expected to show a reading of 55.5, down slightly from last month's 56.0. A smaller than expected reading would be great news for the bond market and would likely improve mortgage rates Wednesday. June's Factory Orders data will be posted late Thursday morning. This report helps us measure manufacturing sector strength by tracking orders for both durable and non-durable goods during the month of June. It is similar to last week's Durable Goods Orders report that tracks only orders for big-ticket items. Since a significant portion of the data was released last week, this report may not have as big of an impact on the markets as you may think. Analysts' are expecting to see an increase of approximately 1.3% in new orders. The most important piece of data this week and arguably the most important each month is the Employment report. This report gives us the U.S. unemployment rate, number of new jobs added to the economy and the average hourly earnings reading. The ideal situation for the bond market is rising unemployment, a loss of new jobs and little increase in earnings. This report is considered to be one of the single most important releases that we see each month. While the GDP can be considered the single most important report in general, it is posted quarterly rather than monthly like the Employment report. Friday's report is expected to show that the unemployment rate stood at 4.5% last month while approximately 135,000 new jobs were added and a 0.3% increase in average earnings. The unemployment rate probably will not be much of a factor if the new jobs number varies from forecasts. However, due to the importance of the payroll numbers, we will undoubtedly see quite a bit of volatility in the markets and mortgage pricing. Overall, it likely will be a fairly active week in the mortgage market. With several important economic reports on tap, we will likely see noticeable movement in mortgage rates more than one day. The most important day of the week is Friday with the Employment report being released, but since there are three reports being posted Tuesday, we may also see movement in rates then. Wednesday's ISM report should also not be overlooked. The bottom line is that this is an important week for the markets and mortgage rates. I believe that the market is expecting to see weak results, therefore, meeting forecasts or stronger than expected results could drive mortgage rates higher very quickly. Accordingly, I strongly suggest maintaining constant contact with your mortgage professional the next few days. If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers. |
||||||||
Let me know if I can take an application for you anytime! And,
please let me know if you like the format of this email service. I
hope you are reading these so you can stay up on your profession and so
you can make more money too!
*Also, I am available to do a "Hit the Ground Running"
seminar with any agents interested in learning tons of things they can
do to help them succeed in Real Estate. Call me to schedule this. I
need at least 5 agents, brand new or experienced, looking for some
motivation to put this on for you that will take 2-3 hours, depending
on the involvement!
If you don't get at least 10 great ideas that can really help your business, I'll take you to lunch and give you a few more!
|
|
I hope you have a great week this week in real estate. Call me if I can help you with that!!
Sam Thompson - "The Jumbo Guy" 843-230-7929
|