Jon Kutsmeda

(original posting 4-24-2008)

Aloha!

Last week one economist described the current market as an ‘Oreo cookie'. Meaning we have had our first hard and crunchy outer part and now euphoria has hit as we get to the creamy center. But once the creamy center is gone we go right back to the hard and crunchy bad part. It would appear that last week the market was foaming at the mouth on the creamy center and had forgotten about the part still to come. This is all really just a silly way of saying that there is in overwhelming element of denial in regards to the current recession. There really shouldn't be speculation anymore, the economy is contracting on numerous levels, but yet investors seem to be stubbornly oblivious to this fact and stocks are standing their ground and occasionally they've even rallied. This market behavior had rates back around 6% at the end of last week. Have you ever tried a peanut butter Double Stuf Oreo? If you haven't, I highly recommend it! Especially if you got nervous during last weeks up trend and decided to lock; a bag of Oreo's is a good way to ease your pain as rates have already slowly recovered the first half of this week with some lenders pricing at 5.75% on a 30 year fixed rate mortgage.

There is certainly an element of risk anytime you float your rate in today's market but I'm confident "the trend" will hold and that this gradual recovery in rates is only the beginning of what hopefully will be a major improvement in the next few days. Remember bad economic data is typically good for bonds and thus good for mortgage interest rates. So recessionary data is exactly what we want to hear. Regardless of the economic forecast I think rates will continue to gradually improve back to the 5.5% mark not just because the news is bad, but because it has been the trend so far this year. So, despite the fact that the economy is no longer on the brink of recession, but more like free-falling face first into one, well in fact I'd say the plume of smoke that rises after Wile E. Coyote just plummeted thousands of feet to the base of canyon is a more appropriate way to describe it, but despite this fact, I'd still bank on improvement over the next week because the trend says so. Hey, I have a math degree I can't get enough of those cheesy graphs and prediction charts, but this has a bit of gut instinct to it too, something I'm sure the Hawaii gambler in all of us can appreciate.

So, what trend? Well, it's not complicated or extensive, but so far I've noticed that every time this year before a Federal Open Market Committee(FOMC) meeting when there was a predicted rate cut the markets stayed unchanged for an extended time usually weeks well before any FOMC meeting. Then, there was a short stock rally well before the meeting, followed by a gradual recovery in rates the last week before the FOMC meeting, until bonds rallied in the days before the rate cut and rates drastically improved. Finally, shortly after the drop in rates, usually the same day as the rate cut, interest rates gradually came back up and then back into the extended period of unchanging rates. You could go crossed eyed trying to dissect the actual reason why and the investor mentality behind the trend in trading or you could have a bit of faith in it and the fact that it's occurring all over again and put your chips on the table. In fact this week has been very quiet in terms of economic news so the markets have more or less been up to themselves to establish a trend so with no outside influence or new economic indicators investors have still been shadowing "the trend".

I could be wrong, but even if I'm off on this "trend thing", rates are most definitely going to see another cut at the end of this month, probably by 0.50, and the economy isn't going to just suddenly pull its' self out of the gutter over night, so I'd still be optimistic that we will see rates in that 5.5% range again. This window of opportunity may only happen once, and maybe only for a day or maybe only for a few hours, but it should happen so hang in there. In some cases time isn't on your side, hence the ticking clock of a purchase agreement, so in that case roll the dice for an improvement before the FOMC meeting on April 29^th/30^th. Yet, most people seem to be in the refinance market these days, and most in that boat aren't in a hurry as much as they are looking to get the best rate possible on their refinance, so in that case we need to be ready to lock when the opportunity knocks, so call me and let's talk about your market strategy over a glass of milk and some Oreo cookies, double stuf of course. Aloha!

(original posting 4-10-2008)

Important news about 100% financing, please read

Aloha!

Mortgage interest rates haven't changed much over the past two weeks hovering around 5.625% despite that the big picture has been relatively gloomy. Even though bad news for the economy usually means good news for bonds and mortgage rates we haven't seen the expected market reactions. Either we are blindly charging forward or more needs to be said for the resilience of the American economy. Stocks remain strong, but many stand firm that this is just a delay of the inevitable and the reality of recession will eventually sink in, eventually leading to a bond rally and lower mortgage interest rates. Yesterday's Fed minutes release from last months FOMC meeting indicated that the economic slowdown could continue well into next year while Former Federal Reserve Chairman Alan Greenspan shared similar thoughts at a conference in Tokyo on Tuesday. Mr. Greenspan feels that home prices are starting to stabilize and that we may see a very large rate of liquidation in the second half of this year. Once most of the home inventory has been eliminated then the markets can start to stabilize, but as Greenspan put it, "it will be slow, it will be hesitant." Greenspan also said that inflation will be contained during the current slow down before picking up as the world economy recovers. Which is great news for bonds, remember as far as mortgage rates are concerned, recession good :-), inflation bad :-(.

So, let's take all this and blend it up into an analysis. First add bonds, then add stocks, a dash of the Fed, a splash of Greenspan, hit blend, then serve:

I think the early bird gets the worm in this case. The rollercoaster is probably far from over, but the markets seem to be getting use to the ride. So I wouldn't expect magical rates to just suddenly appear. Even if we slip into a worse economic situation and recession is no longer a debate but a reality, that doesn't guarantee rates are going to go sliding with it. The Fed can lower rates all they want, but as we've seen so far this year that usually works against bonds as it tends to stimulate a stock rally. But really, why is anyone waiting? Even if rates dip under 5.5% again how much of difference will it actually make and is it worth losing out on a great price on a great investment. I'd hate to see people miss out on the bottom floor because they were waiting for someone to announce it's here. Hi, I'm someone, Hi, it's here! You don't officially know it's the bottom until it starts to stabilize and recover and guess what it's starting to stabilize so here comes the bottom, don't wait for the memo! Once we start to eliminate the inventory this great window of opportunity will have past.

But, besides the price points there is another factor that is squeezing the opportunity out of the market. In case you haven't heard 100% financing is all but a thing of the past. The mortgage insurance companies are no longer willing to ensure up to 100%. I still have a lender or two that can still do 100% financing, but it's not going to last. So come on early bird, get the worm! Also, lenders continue to tighten guidelines, while others continue to seek buy outs and financial support. We're all familiar with what happened at Countrywide, Bear Stearns almost went under last month, and now Washington Mutual is discussing a deal for a $5 billion dollar cash infusion from a private equity group, this days before announcing they(WaMu) would be exiting the wholesale lending industry.

The way I see it, the time is now, so let's get excited! Rates are incredibly low, home prices are bottom floor, the market can still offer good financing options, and with economic recovery right around the corner, the window of opportunity is NOW!!

Aloha!

(original posting 3-27-2008)

Aloha!

Let's talk LOCKs for a quick second. I feel that for the most part the idea of a loan rate lock is misinterpreted. Locking an interest rate with a particular lender is NOT a loan commitment. It is simply securing that lenders current interest rate(s) for a particular length of time, typically 30 days. There can be quite a bit of strategy that goes into the LOCK process, but in many cases it's not to be over analyzed considering there is still plenty of flexibility with a rate lock, such as lock extensions, buying down the locked rate, or completely changing the loan program for which the rate lock applies. One should at least be a little cautious when considering a lock because you don't want to be unaware of expected improvements in the market and hastily lock only to see rates improve the following day, but with a good overall understanding of the daily market changes as well as the general predicted direction of economic factors that effect rates, a smart and comfortable lock decision can be easily determined.

Of course a back up plan never hurts either. As I mentioned locks should not be made hastily, but in the event that an unexpected improvement in rates occurs, it's good to know that you have other options. The goal and intent is always to move forward and close a loan that is locked, but intent doesn't mean you are obligated and if rates improve and a second lender can then offer the same loan at a better price, it only makes sense to move forward with the different lender for the same loan at better pricing. Add this concept to the plethora of advantages to working with me as I am associated with an extensive list of over 25 local and national wholesale lenders, who for the most part are all very competitively priced with each other. Didn't quite catch my point on that last sentence? Well here it is another way, since I work with multiple lenders each with competitive rates, it allows me the advantage to stay flexible in a constantly changing market while at the same time offer the security of a rate lock when rates are good, thus it makes the loan process a lot more like a game of checkers then a game of chess.

With this said, the end of this week will also most likely bring the end of the SISA loan. SISA(stated income/stated assets) is currently pricing the same as a FULL document loan. However, if a SISA loan isn't locked by the end of this week, the option to get what is virtually a NO doc loan at FULL doc pricing will no longer exist! This information, along with what I discussed above about rate locks begs the question, "What are you waiting for?"

(Quick Market Update)

There is so much going on I'm not sure how to effectively share it all, but here is the short and sweet of it all. Rates have increased slightly after March's best last week of 5.375%. The past few days we've seen rates hover around 5.625% with the occasional midday price change for the worse. There is a lot happening these days and lots of important data to be released the rest of this week. Most of the data is expected to be negative and further pointing in the direction of recession, which should be good for mortgage interest rates. However, when predictions are clearly pointing in a particular direction, any kind of surprise seems to tip the whole boat. So, we should hopefully see a slight improvement on rates in the next few days, but if just a little bit of odd ball data hits the markets, interest rates could suddenly change for the worse despite the still strong indicators of a slowing economy which otherwise would be good for rates.

I don't mind sharing my insight on the above matter, but in certain cases I feel it's a moot point considering that for the most part SISA need to be locked by the end of the week regardless of the rates, but even with a negative change to rates, this is still a GREAT time to consider a NEW mortgage loan. If you choose to gamble a little, hey this is Hawaii, but if you want to take your chances as to whether or not there will still be lenders offering SISA loans next week feel free, but if that's the case why not lock with a lender which has clearly stated the SISA loan won't be available after Friday. Like I mentioned, a LOCK is NOT an obligation and if things improve and there are still other lenders offering SISA, then do the loan at the better pricing. Makes sense to me!! There is nothing to lose, except the ability to get approved for a loan because SISA is no longer available!

SISA, LOCK IT!!

Aloha!

(original posting 3-18-2008)

ALOHA!!

(Realtors and Real Estate Professionals be ready tomorrow for a special announcement from "National Lending Agency")

This afternoon, the Federal Reserve announced that it had lowered the fed funds rate today by 0.75% to 2.25% and the discount rate by 0.75% to 2.50%.

But, guess what!!

Rates were better yesterday with conforming 30 year fixed rate loans pricing around 5.375%!

Déjà vu

Seems like every time the Fed makes a cut, the market is in such anticipation that the bond markets rally the day before and when the official announcement is made the following afternoon stocks rally as investors shift funds from bonds into stocks. So although the rate cuts stimulate investor spending it tends to be in sectors other then bonds, which isn't good for mortgage interest rates, hence the deterioration in mortgage rates from the previous day.

I apologize that I didn't update everyone yesterday once there were price improvements but when the market improves so drastically and so quickly there is little time for midday market updates, it becomes an all day dash for file submissions and LOCKS! In most cases these aren't new loans but clients that I have previously consulted, and we were patiently and expectedly waiting for yesterday's improvements, and reacted accordingly.

So the question becomes "Are You Ready?"

In today's real-time market, a day late leaves you much more than a dollar short! The loan process is more involved than most realizes and can involve just as much strategy as a stock portfolio. So if you want to take advantage of positive swings in the market you need to be READY, the overall picture should already be discussed, documentation reviewed and assessed, and a strategic plan of attack implemented. So when the next rate drop occurs everything is already in-line and a low rate lock is just another executed step in a well established plan. "Are you Ready?"

Call me TODAY so we can discuss "Your Plan", because in today's ever changing market it's never too late to be prepared! Aloha!

(Market Update)

As previously mentioned today's Federal Open Market Committee meeting adjourned with an announcement of a three-quarter of a percent cut to key short-term interest rates. This led to a significant stock rally with the Dow up 420 points and the Nasdaq up 91 points. The stock rally hurt bonds by investors shifting funds from bonds into stocks. Also contributing to this afternoon's selling was the post-meeting statement that indicated the Fed was concerned about inflationary pressures within the economy. However, a nod to possible further rate cuts was provided by the comment that "downside risks to growth remain."

February's Housing Starts was today's second release which showed stronger than excepted starts of new homes. That could mean that the housing sector may be stabilizing, at least in terms of new construction.

There are no major releases on Wednesday so the markets will continue to react to the results of the Fed meeting, however The Conference Board will post its Leading Economic Indicators (LEI) for February late Thursday morning. That index attempts to measure economic activity over the next three to six months. Current forecasts are calling for a 0.3% decline, indicating that economic activity will likely slow in the coming weeks. This would be good news for the bond market and mortgage rates.

***So this should mean that we have most of the day tomorrow to prepare for what could be a great day for bonds and mortgage interest rates come Thursday as the markets will finally start to react to the Fed cut, that, combined with what may be more bad economic data should hopefully create a bond rally Thursday and another GOLDEN opportunity to lock in low rates. Once again, "Are You Ready?"

(original posting 3-12-2008)

Aloha!

BIG NEWS!! The surf is up today in Hawaii and so are the CONFORMING LOAN LIMITS!!!!!

NEW conforming loan limits are officialy HERE! Loan amounts up to $793,750!!! instead of $625,500. That's NOT Jumbo, that's CONFORMING!! So loans up to $793,750 are now eligible for conforming pricing!!!

Loan Limits are based on zip code, so e-mail me today to find out the loan limits in your area!!

(Market Update)

Over the past few weeks we've seen rates rise and hover around the 6% range due to concerns of inflation. Yesterday news was released that the FED will set up another one of their popular term auction facilities which will lend up to $200 billion in Treasury Securities, basically a cash injection to the capital markets. This puts money into the bond market but what usually tends to happen in the immediate wake of announcements like these is a stock rally which is the case so far with the Dow currently up 80 pts today continuing yesterday's strong rally.

So optimistically we should see an improvement in the bond market which would lower interest rates, however tomorrows 10-year treasury note auction and the release of February's retail sales data could lead to additional volatility in bonds and a further tug-of-war between concerns of recession and inflation which has kept rates slightly above 6%.

Today has seen a Midday price improvement and rates are down around 5.875%. I recall a similar reaction in the market about two weeks ago which was followed by a late day price increase and further market deterioration the rest of the week, so I'd recommend taking advantage of today's window of opportunity and lock in a rate.

I only need a name and an address to lock and rate locks aren't a loan obligation it is simply securing the days rates for your potential loan. Also any loans locked this week will receive a 20% discount on origination fees!! Don't hesitate call today!!! Aloha!