Brad Lynch

Ok, for the Layman's terms...that's how I "roll". I put it in terms YOU can understand.

Govie (Government, Washington, Uncle Sam, etc...) has got a plan. Treasury Secretary Henry Paulson (money organizer of Government) has suggested that Govie buys the "toxic" mortgage assets from American banks at a discount. This means that the banks can unload their risky mortgage assets to the government for less than what they are worth, but expectantly better than what those assets are worth after the next wave of defaults comes through...the bank can stand to loose a calculated amount, but possibly not an unforeseen/unexpected amount that might occur in foreclosure costs. This way, banks stand to have a higher probability to make it through this U-G-L-Y situation. Now, I like the idea of the plan for a simple reason. First, I'm not an economist and therefore it's my opinion. I like it because our government has taken on some major liabilities in the very recent past with the Fannie/Freddie help, bailing out big player lenders, war, etc... It's obvious that our government has the strength and money to help everyone when times call for it. A good example of a sign that might show that, is this; Me and you are not economists, so we have to look to signs of those people in our world that are, to see what confidence they have in our Govie for help. Well, when Henry suggested this option to help, stocks blew up like 400 points. If stocks are going up, that means the people who are economist and ARE in the "know", are momentarily confident. Back to why I like this. Since the government is buying these mortgage assets for "cents on the dollar", they stand to make a profit when the market turns around. You catch that? I'm ok with Govie making "ends" (ends=money or profit) on such a scenario so that they can reimburse themselves for the spending they have done to get our economy back to par, so that the next time our economy is against the ropes, they'll have the money power to dig America out again.

Oh by the way, rates terrible today because of all this. Remember, whats good for the economy isn't usually good for our mortgage interest rates. If you wonder why, search my archived blogs that explain that.

Brad

Just in case you are new to the search and learning mortgage, the basics are as follows. Mortgage rates are directly related to bonds. When bonds do good, your mortgage rates drop. Today the bond market opened very positive again like yesterday...that's good for your interest rate and helps you get the best interest rate possible. Oppositely as yesterday where the bond market did SUPER and the Stock Market plunged, as the bonds did well today, the Stock Market opened with modest gains as well. Yesterday we saw a large swing in rates, but today we may only see a little swing. If we see a couple more days like yesterday and today, rates will be as low as they have been in 3 years.
WHY ARE RATES SUDDENLY DROPPING?
Lehman Brothers, a large player in the lending world, filed bankruptcy. This makes the more risky stock investments even more risky, so the stock investors take their money out of stock and put it in bonds...supply and demand. So yesterday, the Dow Jones Industrial blundered a 500 point drop. Aurora is a subsidiary to Lehman and more involved in the day to day mortgage lending and servicing, so expectations of Aurora's success are no good either...they are giant in this mortgage lending world.
Paul Jackson said it in a way that makes it very easy to understand, "In lending terms, Aurora is a shell of its former self: the company, once an Alt-A powerhouse for Lehman, laid off 1,300 employees starting in January of this year as it cut both wholesale and correspondent origination channels. As recently as the first half of 2007, however, Aurora was regularly seen producing more than $3 billion a month of Alt-A mortgages." He also mentioned that they are a giant when it comes to servicing companies - ranked 15Th largest service by Inside Mortgage Finance for 2007. We don't want Aurora to tank, but if it does and you see it hit large Mortgage Media, you might expect another drop in rates.

Today, I talked with one of my home investors. He has probably 25 or more properties in Irving Tx. He takes good care of all of his rentals...helps that he owns a construction company and has crews that touch up and fix up all the time. He bought 3 homes with his personal line of credit over a year ago, and now is wondering how he'll get a permanent loan to pay himself back. He asked me today, "so when you think them banks will loosen back up so I can get these homes into a permanent loan"? He's got at least 15 of these homes in portfolio financed. I said, "right when we get good news, it seems like we are overtaken with bad news shortly after."

Well, lets see where todays news takes us in this wonderful world of Real Estate. Your mortgage may like it!

CNN reported that Bond prices went out the roof...that's good if you are buying a home and the interest rates follow their "trade" in case. It was big news last week with the Fannie Mae and Freddie Mac "Gone Govie" issue. So between Fannie/Freddie news, Lehman Bro's, and today's Stock fall, there is no history that matches this type of "shot to the ribs". Investors are staggering around like a Mike Tyson victim that made it to his feet before the 10 count after a shot to the chin, and they don't know what to do next, or what action to take, or what to expect. CNN reported, "The Dow Jones industrial average (INDU) lost 500 points, or 4.4%, according to early tallies. It was the biggest one-day point decline for the Dow since Sept. 17, 2001, when the market reopened for trading after having been closed in the aftermath of 9/11 terrorist attacks."

The tax credit from the Housing and Economic Recovery Act is money that is given and then paid back in an interest free loan. So, this is one of those, "they giveth in large print, and taketh away in small print" opportunities.

MCC has a tax credit that is similar in many ways, but doesn't have to be paid back...they have a recapture similar to ALL the other things, but that's no biggy. If your market or you are able to target a market in the cities and counties of, Denton, Ellis, Erath, Hood, Hunt, Johnson, Kaufman, Palo Pinto, Parker, Navarro, Rockwall, Somervell, Wise, Cedar Hill, DeSoto, Duncanville, Lancaster, and Waxahachie, this can help you. MCC has an up front fee that at first glance makes you say, "huh", but the money saved in the first tax year covers that, and then the benefit for the remaining years they live in the home at tax time just multiplies that. At the end of every year, your client takes the amount of interest they pay on their loan and multiplies it times 35% and they get that amount in full at tax time, maximum of $2k. Example: Say your client pays $6,000 in yearly interest on their home loan. You take $6,000 X 35% and get $2,100...$2,000 is max, so they get the full $2,000. If they owed say $1500 in taxes, now they get $500. If they were going to get $1500, now they get $3500. They receive this formulated tax credit for as long as they live in the home!

More, if they get the full $2k, you can use that money toward their income for qualification. $2,000 divided by 12 months, means you can increase their income by $166.67 and now they might approve where they didn't before. Fannie and Freddie approve this...if your lender disagrees, have the rep at MCC take them through their own Fannie Freddie guidelines.

The good thing compared to city and state money, the income limit is $60k. Most of city and state money will require a percentage of median income that is usually much less than that.

I hyper linked the "MCC" in my message above, so you can go there and read.

Best of luck!

Allllllllllllrighty then. It's been talked about and it's not necessarily brand new information, but FHA down payment requirement is going up to 3.5%. No longer will closing costs be considered as part of the amount of money they have to have involved in the transaction. They will have to have 3.5% down payment...3.5% is from the lesser of the sale price or appraised value.