The Ben Borden Mortgage TEAM; The leading source for home loans throughout Virginia!

Over 275 subprime lenders, Countrywide, Bear Stearns, Lehman Brothers, Merrill Lynch, Washington Mutual, Fannie Mae, Freddie Mac and now Wachovia……. getting bought out days before it would have to go the way of Lehman Brothers. The FDIC comes out to say that “Wachovia did not fail.” That is a major play on words.

The American public spoke today. I for one am getting tired of the “bailout talks.” Let the cards fall where they may. Giving $700 billion is nothing but a reward to those that got us in this mess. At what point would a rational person think there was a problem? After the 275 subprime lenders? It just did not have to go down this way. Why do taxpayers have to ante up? We did not do this.  There are other ways to fix this situation and saving some executives butt is not something to which I am inclined to say yes.

I say, hell no to the bail out. There has been way to much saving face with Wachovia, Bear, WAMU and all the others.

Bookmark It

Hide Sites

Big news today was that Warren Buffet was taking a $5-10 billion stake in Goldman Sachs. Two important points to point out is over the last few days Goldman has repeatedly stated that it was in no need of equity and sufficiently capitalized. The second point is not to get too excited. Yes Warren Buffet is the greatest investor of all time and yes he is very shrewd and yes he makes a ton of money on his investments but I would not go as far as the media to say that his investment marks the bottom and would not follow his lead just yet.

Listening to the media there has been 3 prior bottoms as well. His $10 billion is protected to the tune of a guaranteed return of 10% a year. So the bottom is a lot closer for him than us little guys. But this is a good this as a vote of confidence in the sense that the investment community is more willing to make investments in the financial sector…and this could be a turning point. But probably not THE turning point.

On the flip side  Fed Chairman Bernanke and Treasury Secretary Paulson had some trouble selling the $700 billion bailout to the Senate Banking Committee. There is a lot uncertainty regarding this bailout funding and the market will be very reluctant to go higher until it can see the plan come together.

So once again we are in a hurry up and wait mentality.

Bookmark It

Hide Sites

Do not go to the bath room with an unlocked loan or open trade. The 10 minutes can cost thousands! Volatility and panic set in the market again as traders once again questioned the governments plan to buy mortgage backed securities and bid up commodity prices and sold the dollar. Looking forward to the fed having to auction off more Treasuries in their effort to raise the $700 Billion needed to finance the bailout. It’s pretty much a sure thing that anything the government estimates is off by 2/3rds. So it’s only a matter of time before they are in the trillions.

October Crude contracts were trading $25 higher at one point, the highest one day gain in history, closing up $16.37 higher on the day. With oil higher and heavy metals such as gold rallying nearly $45 an oz, we are once again touching on inflationary fears which would make mortgage rates soar. After hitting a recent high last Tuesday of 101.69 the 5.5% MBS have given up nearly 175bps to close at 99.9375. The Dow got hammered and gave up nearly all Fridays gains to close down 372 points.

If we are in a recession, mortgage rates don’t know it yet. The markets tend to be very omniscient.

Bookmark It

Hide Sites

The market is hanging deep in its hole but has at least stopped digging. The weekend is thankfully approaching and trade is wondering just how many more things can be thrown its way come Monday morning and how it wants to be positioned. It has paid off to be long the flight-to-quality trade and given Paulson’s less-than detailed press conference, the dip buyers may yet be inclined to shore up prices at the lows.

The 10-yr yield hovers around the pivotal 3.76% level with a close below keeping bonds in the game but severely scrambled.  With the Dow, NASDAQ & S&P raring upwards, Treasuries and Agency MBS’s are taking the brunt of the blow as investors move safe harbor capital off the sidelines to deploy them back in the stock market.  As a result, Agency MBS pricing is off a full point as is GNMA (FHA) MBS.  Wow, what a week it was.

Bookmark It

Hide Sites

The market backing off with the flight-to-quality taking a bit of a breather. Central banks have coordinated an injection of about $180B into the banking system (Bloomberg) and that seems to have calmed some nerves, for now. But the threat of broken banks hasn’t just gone away and funds will likely flow to treasuries, just not as panicked.

Once again, with each new fix the risk is it doesn’t work.  Not that anyone is paying attention to the mundane economic data being released, but initial claims came in on the high side of expectations at 455K vs an expected 440K mark and leading indicators off consensus levels as well.  The slumping economy’s impact on the credit crunch has not been addressed as much as the vice versa effect, the credit crunch’s effect on the economy.

Don’t discount the exacerbating effect on the current financial fiasco of an economy that is shedding jobs at an alarming pace.  So doom and gloom aside, agency MBS pricing is selling this morning as the central bank capital injections have temporarily soothed the flight to quality stampede.  FNMA 5.00% MBS are off 12 ticks (-12/32) while GNMA (FHA) 5.00% are off 7 ticks (-7/32).

Bookmark It

Hide Sites

What a great Super Bowl game! Eli Manning sure quieted the critics tonight. I am not fan of either team but I was rooting for the Giants to win. There were two big reminders for me tonight. The first would be no matter how hard you work, how hard you train, how many games or battles you win, if you do not take home the prize, all is lost. The New England Patriots had the opportunity to continue in the history books and lost in the final seconds.

When working a financial plan, I see all sorts of folks go out of the gates leading the race and somewhere along the line things seem to fall apart. Working a plan is a long and arduous process. It’s crucial that you are in constant contact with your coach (financial planner) and stay on course. Its very easy for folks to get “tired” in the 2nd and 4th quarters.

No one expected the Giants to win. They were underdogs according to every sports poll, broadcaster and viewers. Not only did they not expect the Giants to win but some expected the Pats to win pretty easily. After a lackluster finish last year, Tom Coughlin was on the cusp of losing his job. After the first two games of this year Eli Manning was about to be taken out and be stoned. EVERY publication and news show was telling him how bad he was a quarterback.

The second thing I was reminded. That everyone has the same opportunity to be successful in life. Every morning we get up and put our clothes on just like everyone else. So what separates the successful from the unsuccessful? Beliefs. What limiting beliefs are holding you back from achieving what you want most in life?

Bookmark It

Hide Sites

I received a call Friday January 25th, 2008 from a freelance reporter in Los Angeles named Marcie Geffner who was doing a story for a well known bank website called BankRate. She wanted to interview me to get my opinion on whether those with adjustable rates should take advantage of the lower fixed rates and refinance.

You can see the whole Bank Rate article here.

This interview led me to some important points that I want to make. It’s not a marketing secret that scaring the crap out of consumers is a pretty useful sales tactic. People buy on emotion and make emotional decisions and the news media and advertisers sell products that way.

I have been pounding the table since May 2007 that the Federal Reserve would start to lower rates in the fall of 2007; you can see my Blog post. So this big whoop la comes as no surprise.

What needs to be understood is that mortgages just like any investment should be managed. Just like investments, different loan products “perform” better during certain periods and working with a Certified Mortgage Planner allows customers to take advantage of changes in market sentiment and conditions and save $10’s of thousands of dollars.

Managing a mortgage is not about getting the lowest interest rate. It’s about matching the mortgage to the client’s financial goals. When you match the mortgage to their financial goals rates do not matter. The loan program that you have is meeting a certain financial need of the borrower.

This is part of wealth creation I explain to clients. In this business I have meet many people who have achieved great wealth by aligning their mortgage (s) to their financial need. I have never met one that achieved great wealth because they received the lowest mortgage rate. [Read more →]

Bookmark It

Hide Sites

In an emergency phone meeting, Monday night, the Fed Cut Rates .75%. The biggest one time rate cut since 1984. The Fed meet before its scheduled January 29th-30th meeting and is expected to cut ANOTHER .50% at that time. This move all but says we may be in a recession.

The stock market is scheduled to open with its worse drop in recent memory and bad news for Bank of America, reporting it a 95% drop in net income and may call in to question the buy out of beleaguered Countrywide.

If Bank of America does not go forward with the Countrywide buy, Countrywide is all but assured a spot in Federal Bankruptcy court and that would send additional shock waves through the financial markets.

Those with adjustable rates gotta be loving the current rate environment. I have been saying since May 2007 the Fed would lower rates and I would go with short term adjust ables. Those with a home equity line of credit will see their rate decline this month of at least .75%. All the short term adjustable rate indices’s, such as the LIBOR, MTA and CMT will have huge declines today and over the coming months so we will all see our payments going down. Who would have ever thought we would see the 30 year near 5%?

Bookmark It

Hide Sites

It ALMOST cant get any better than this. Mortgage rates are smoking going into 2008. The current interest rate environment is great for adjustable rate mortgage holders. My ARM loan rate is down nearly a 1/2 % just in the last few months and looks as though it will continue to go down throughout this year. This morning I found myself calculating how low my mortgage payment would go if………..Kind of funny. Like when you buy a stock and you start calculating all this money your going to make if this winner you picked goes to the moon.

With the Jobs Report for December showing only 18,000 new jobs when estimates were looking for 70,000 thats quite a surprise. Unemployment is creeping up as well to 5% this is a pretty large increase from Novembers level of 4.7%. Bad news for stocks but great news for mortgage bonds!

The bad news with the slide in interest rates as is with all the so called help from the government for those facing foreclosure or arm resets is that the majority of those wanting to take advantage of the lower rates and refinance can not. Its nearly impossible for even the best of credit scores to refinance their loan right now at anything over 80%. I have had four loans in December alone, all rate and term refinances (no cash out), all mid 700 credit scores not get approved. Its ridiculous right now, mortgage bonds are at the best they have been since summer of 2005 but its increasingly harder for approvals on refinances to take advantage of them.

Fannie Mae and Freddie Mac have all but closed up funding higher loan to values. I do not see this getting better anytime soon and even see it getting worse before it gets better. Most lenders have already added Risk Based Pricing to loans that Fannie and Freddie are officially starting in March 2008. Some lenders are starting to take away Investor loan programs for cash out. That is correct No Cash Out for Real Estate Investors, not even $10. Also some lenders are pulling Expanded Approvals as well. Then you have the automatic 5% value reduction for declining markets.

The storm is not over yet. There are going to be many more limiting changes that are coming down the pipe I am sure and It will not matter how low rates go if mortgage holders can not take advantage of them.

Bookmark It

Hide Sites

With the current market real estate investors have to look at other “back to basics” ways to move investor properties. The three alternative options for investors below are not new but seem to be forgotten, great ways to rethink the marketing and selling of your properties and get your asking price and even more. First you can move your property very quickly. Second, you can name your selling price and most often it can be much higher than the general market will bear. Third, all of these strategies can actually increase your investment return exponentially more than just out right selling your property on the market.

Seller Held Seconds – This is a great option for those rehab investors to get their initial capital out of their property and move on to the next project and also opens the market to many more potential buyers. Let’s say you buy a property for $150,000 and spend $15,000 in renovations. Let’s say after renovations the property is worth $200,000.

The potential home buyer secures a conventional 1st deed loan at 80% of the value of the home and takes out a mortgage for $160,000. This pays your loan off and also you’re out of pocket expense renovating or updating the property. It’s essential, that there is a down payment from the buyer of at least 3% to 5 %. In this instance, you hold a second deed for $30,000.

You become the second deed of trust with all the rights of any 2nd trust deed holder. Most often the terms of the loan are higher rates and shorter balloon terms; let’s say a 36 month balloon (36 months is typically the shortest balloon term a first deed lender will accept) at 12% interest rate with an interest first payment option. So during the 36 months you’re receiving interest payments of 12% and by the end of 36 months the buyer needs to refinance the property to pay your loan off. [Read more →]

Bookmark It

Hide Sites

First off I want to stress that I am not a licensed Real Estate Agent nor am I a licensed Appraiser but I want to take a quick view at the 3 most recent home sales in a neighborhood in Midlothian, VA. I just could not resist posting this as its such a glaring example of hiring a professional not only for real estate but hiring a professional in any field. Its so much cheaper in the long run.

There were three recent home sales in the Lenox Forest Section of Riverdowns. Two of the sales were full service listed homes and one was For Sale by Owner. Riverdowns subdivision is located off Robious Rd. in Midlothian, VA about a .5 mile east of Rt 288. [Read more →]

Bookmark It

Hide Sites

There is a word that is used in investing that I think a lot of “real estate investors” had forgotten over the years. The word is eval·u·a·tion. Webster defines evaluation as:
1 : to determine or fix the value of
2 : to determine the significance, worth, or condition of usually by careful appraisal and study

The current market can make it more difficult to evaluate investment properties. The determined sale price at the beginning of renovations can be 5% or 10% less at the end of renovations. Not to mention you have to account for marketing expenses, carrying costs, tax implications and even have a Plan B.

Its very important that real estate investors align themselves with competent advisor’s that can advise them how to properly structure and progress the transaction. This includes a Certified Mortgage Planner, CPA, Realtor, Property Manager and Appraiser. There are many DIY’s “speculators” out there getting absolutely hosed and even foreclosed.

Its essential that you spend a large amount of time of due diligence when considering an investment property to purchase. Initially this may take some time to develop your specific goal but properly structuring a consistent standard upfront will save much time down the road and allow you to move quickly as investment opportunities arise. A very brief overview of considerations are below: [Read more →]

Bookmark It

Hide Sites

For those in the market to buy a home in the next 6 months you better act fast because its about to get more expensive. Already mortgage lenders have cut back dramatically and totally removed loan programs off the market and now Freddie Mac and Fannie Mae are starting to increase fees on loans making buying a home more expensive and maybe even pricing out some home buyers altogether.

Freddie Mac states “In response to continuing volatility and turmoil in the mortgage market, including the deteriorating performance of higher-risk mortgage products, we are expanding our use of risk-based pricing by adding fees based on Indicator Score and loan-to-value ratio. We are also increasing our delivery fees for certain Mortgages with increased risks.”

Reason 1: Starting in March 2008 there is going to be a .25% delivery fee called a Market Condition Delivery Fee. So for a $200,000 purchase price this would equate to a charge of $500. The Market Condition Delivery Fee is in addition to the announced Indicator Score/Loan-to-Value delivery fee.

Reason 2: The Indicator Score/Loan-to-Value Delivery Fee is the most significant. You will see by the chart below that depending on your credit score this fee can range from a fee of $1,000 to $4,000 based on a hypothetical $200,000 purchase price, this is IN ADDITION to normal closing costs.

[Read more →]

Bookmark It

Hide Sites

Its said that most of the general public believe what they read. I was taking a look at The Wall Street Journal’s Real Estate portal called Real Estate Journal and noticed and article on “What Moves Mortgage Rates” written by Teri Cullen. It always gets my curiosity when I see articles like that because 50% of the time they get it wrong, although its predominately fellow peer loan officers are the ones that really get it wrong I did not think the Wall Street Journal, “The King of Finance Media” would.

I will let you read the article but basically Teri Cullen answers the question from a reader named Victor. “Victor, mortgage rates actually follow the bond market, not the Fed-funds rate. The interest rate on a 30-year fixed-rate mortgage tracks the yield on the 10-year Treasury note (at Tuesday’s close 4.383%.).”

This is just not accurate. First, the 10 year treasury is a government backed instrument and has no direct effect on the direction of mortgage rates. Second, mortgage rates follow mortgage backed securities or MBS’s which are issued by Fannie Mae and Freddie Mac. While sometimes interest rates and the 10 yr tsy may move in the same direction, one does not affect the other. Very often they trade in completely opposite directions. You will notice by this quote that 6.0% mortgage bonds where up 6bp’s points and the 10-Year was down 72bp’s.

This brings me to another point. When I talk to prospective borrowers one of my handouts lists “questions to ask your loan officer” and one of the questions on the sheet to ask “What are mortgage rates based on?” Its the very basic of knowledge. This is the largest transaction of your life and far too important not to be handled by a competent, quality professional that’s trained to advise you properly. If they do not answer correctly run…do not walk to a loan officer that does know the correct answer. It always amazes me when talking to borrowers how indifferent some seem at the quality of professionals advising them on such a large transaction. Its like using a stock broker giving you quotes out of yesterdays Wall Street Journal.

Bookmark It

Hide Sites

Fixed Rate Mortgage Backed Securities                            November 26th, 2007

Mortgage rates headed south yesterday to a 2 1/2 year low. News that HSBC, the largest bank in the U.K., was bailing out two of its Structured Investments or SIV’s sent investors to a flight to quality buying bonds. HSBC will be moving $45 billion worth of these SIV’s to its own balance sheet in a move that undermines the $100 billion Super Fund that was in the making with the largest banks of the U.S. HSBC has over $2 Trillion in assets to accommodate a move such as this and is unmatched by the larger U.S. banks.

With mortgage bonds trading at a 2 1/2 year high, those looking to lock in, have to at these levels. Even though there may be more room to move, in the nearer term profits will be taken causing rates to possibly tick up.

The only question is the 10 year treasury bond has moved a lot higher, a lot quicker than mortgage backed securities and at some point the 2% point spread between the two would have to narrow. With the U.S. being in a decreasing interest rate environment, I would take a educated guess that the spread will be narrowed by mortgage backed securities trading higher therefore reducing the yield on long term fixed rate mortgages. An excellent mortgage product to take advantage of the longer term view of reduced rates would be the HOA.

(Images Courtesy of Mortgage Market Guide)

Bookmark It

Hide Sites