Posts from — January 2008

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%?

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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.

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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 →]

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