Clint Hammond

No one can sell anything unless you believe in your product, believe in yourself, and project a positive and upbeat attitude and disposition. That means having the ability to spin anything as a positive.

Stocks are down, the dow has lost 290 points as of 11:22am, the NASDAQ has lost 85 points and the S&P is down 42 points. So the financial markets are in complete turmoil right now. We're awaiting the final word on the bailout vote and it's not out of the question that the Wachovia news is enough to prevent an immediate rally in stocks regardless of the congressional vote. So how in the world can you spin that as a "good thing." Depends on what you do and how you look at it.

The result of the stock performance today is a flight into bonds. The 10 year treasury is currently up 159bp on the day which means we have a yield of 3.65%, down .20 on the day. What THAT means is that the yield on the 10 yr is actually negative in that it's dipped below the rate of inflation. That makes MBS that much more attractive and we're enjoying a 69bp day gain as of now. Some investors are already repricing for the better.

We could see substantial rate drops over the afternoon and as we move further into the week. Big, big week so make sure you check in as often as possible as I am going to do my best to get as many updates as I can on here so that we can all keep an eye on things.

Make sure you are calling "fence sitters", rate drops should increase potential home buyers and make sure you have them ready to go in that they are pre approved, not pre qualified. It's crucial to understand the difference.

Let me know if I can help and we'll be awaiting the vote and the markets reaction to it.

Indymac- check.

Countrywide- check.

Bear Stearns- check.

Lehman Bros- check.

Who are we missing? That's right, Washington Mutual. I knew I was leaving out the largest bank failure in US history. Anything else? Oh, yeah, the bail out stalled I think immediately after I posted last nights entry. I didn't realize that the House of Reps not only read my blog but also were out to get me like that. Learn something new every day.

Now is seriously not the time for the panic that I already feel rushing into the day that we have in front of us. I walked into the gas station on my way in this morning and the cover of USA Today and the local paper both just oozed with panic and anxiety.

We have to remember a couple of things in order to truly put this all into perspective.

1- People and companies will fail. That is the nature of things and that is the "natural selection" process at work on an infinite number of levels. It is bigger than our government, it is bigger than our president and/or the presidential election, and it is bigger than the neat little box we try to put "our time" into. This is long reaching inherent system that regardless of regulation/deregulation, tax cuts/tax hikes, economic policy and political posturing, is going to in some way play itself out until it brings about the natural order of things. If the government is to suppressive to that system, there is revolt. If the government "tinkers" with it and attempts by member's of government are played to personally benefit from it, it becomes toxic and then has to flush it system out the way we're watching it do right now. When the system is flushing itself, people will be hurt, companies will fall, and chaos will seem to rule the day. The reality is that government tinkering may have only prolonged it and therefore made it worse.

2- People and companies with behavior unbecoming may profit in the short term. In our little window of time, but over the long run, they will be hit the hardest by a system flush and those that do things right, that labor endlessly but with a clear conscious, will remain to pick up the pieces and will be able to provide for themselves.

3- Don't believe everything you read in the paper or see on the news. Take the time for independent research from multiple and opposite sources. If I believe what I just read in the paper, I wouldn't be writing this, I'd be headed for the house to crawl in the bed for the rest of the day and await the four horseman of the Apocalypse to show up and finish everything up for us.

I know when the dust settles, I'll be standing here doing business because I do right. I turn away business that I know is not in the best interest of my borrower and I push for what I know is in the best interest when the time comes. I try to help the R/E Agents I know be more efficient, more knowledgeable, and close more deals without having to worry about those deals while they are in the process. I know that I frustrate them at times when my answer is "That's not a qualified buyer" or "They don't need to buy a house right now" or something that is contrary to their self interest, but then again those buyers went to other sources of financing in the past and here we are with foreclosures going through the roof and Washington Mutual closing up shop. But I'm still here and my borrowers aren't facing foreclosure.

Do the right thing when given the option and whatever sting is felt in the short run will be outweighed by the return you will see in the long run.

I'll update you at the end of the day. So far MBS are up 22bp so we'll see....could be interesting so we might as well enjoy it because it is certainly history in the making.

Although it was not as initially proposed by The Hammer Hank Paulson, the bail out was agreed on in principle today. The $700 billion plus proposal was scaled back to $250 billion of immediately available funds with and additional $350 billion that could be accessed and only prevented from access via a congressional vote. That is the initial information I have an tomorrow morning I will go more in depth. The bottom line is that it is certain SOMETHING will be done and the markets reacted for sure. In other news today, Durable Goods Orders fell by a greater than expected -4.5% in August vs the -1.3% consensus estimate. Largest decline in 19 months. Initial jobless claims shot up by 32,000 in the latest week to 493,000, their highest level in seven years and more than the estimated 450,000. This suggests a very week jobs report next Friday. New Home Sales were reported worse than expected at 460,000 vs the 518,000 estimated. It was the lowest sales level in 17 years and new home inventory rose to a 10.9 month supply from 10.3 months. Bonds were up at this point, obviously the doom and gloom is a good thing for mortgage rates and the bond market. Then the sell off began. Bonds dropped to their worse levels of the day and stocks rallied on the congressional leaders reaching a compromise. Mortgage backed securities got a technical bounce in the afternoon and rallied to close our FNMA 5.5% MBS at $100.09, a gain of 9bps, after trading in a huge 66bp range. Dow picked up 196 points to close at 11,022, the NASDAQ moved 30 points higher closing at 2,186 and the S&P beefed up 23 points to close at 1,209.

Rates are going to be poised to move lower next week as we are well below the ceilings of resistance the floor of support is strong as evidenced by today's bounce. The week job market which will be highlighted by next weeks report as well as adjusted figures for previous months, will help out. The uncertainty of the bail is all but gone as it appears to be ready to implement before trading opens on Monday morning. This, although bad for bonds early in the afternoon should be good in the short run for us because of the "now known factor" of what is going to be happening. On top of that, we're looking at a government backed FNMA and FRMC note that gives a higher yield than a t-bill so mortgage rates are ready to drop.

GET ON THE PHONE AND CALL YOUR FENCE SITTERS!!! Now is not the time to play the waiting game. If it's going to happen, they need to move now. If you or anyone else you know is looking for purchase money or has been contemplating a refinance, now is the time because we should move low enough to make it work and who knows where rates will be by years end. Get on your horse and get to work!!

Final Credit Class.

10% of your score is derived by inquiries.

- Multiple auto and mortgage inquiries are treated as one if made within 14 days. THIS IS IMPORTANT. For those clients who don't want to have credit pulled because it'll hurt their score need to know that A) I can't give them anything concrete without. B) They need to have it pulled anyway, and C) They will all be lumped as one pull because you should be able to shop for the right deal when it's your biggest investment.

- Inquiries affect your score for one year.

- Your score is only reduced for the first 10 inquires.

- Personal, promotional and account review do not count.

- Inquiries can cause your score to decrease between 2 and 50 points.

- Insurance inquires do not count.

Hope this helps. More details on the bail out tomorrow as I have time to digest it.

Existing home sales came in lower than expected. 4.91 million compared to the consensus estimated of 4.93 million. Even bigger news was the fact that the median home price in the US declined 9.7%. Down to $203,100 average sales price. So let's talk about why this is so important if you want to succeed. A 9.7% depreciation in home values, the product you sell, means that you are asking clients to purchase something that according to the news is going to be worth less a year from now than it is currently selling for. No one is ever going to buy that so you better know this little nugget of info if you plan on closing another sale anytime soon. "That's not happening in our market" doesn't work with any consistency, "Don't listen to the media" isn't going to work with many clients. Perception is everything so regardless of what you know or what your opinion is on the topic, the truth is the only thing that works without fail. Math doesn't lie, neither do the laws of economics. It's like gravity, tell me it's not there and I'll prove you wrong every time.

So, the question is, "Is my house worth less today than it was a year ago?" Yes and no, depends on perspective, not perception. In real dollars, perhaps and since we're using US Median price of $203,100 then you can't use "not in my market" because that's the average. If you go to the store and purchase a loaf of bread, the bread costs what it costs and you either buy it or you don't based on what that price is with very little obvious influences acting on that decision other than your personal budget and the price tag on that bread. This is not true with homes. Are you saying that a year ago, you might have been willing to spend $20 on a loaf of bread and today you're only willing to spend $3? (Assuming you have the same budget, the same income, etc. Nothing has changed except what you are willing to purchase bread for.) The answer is no, $20.00 for a loaf of bread is insane. So flip that into real estate. Are you telling me that you would pay $203,100 for a house today that a year ago you would've paid $225,000 for? The answer now is "well, it depends." The bread example didn't "depend on" anything right? The $225,000 depends on the following: What do I have to do to get it and do I have the ability to do that? If I have $20,000 available, a year ago, I could use that for down payment and still have money left over. My opportunity cost of spending that money is the same but I don't have to use as much of it so the opportunity cost of purchasing the house is lower. Today, guideline tightening being the culprit here, means I would have to use that full $20,000 to purchase the home so now the opportunity cost of buying is much higher. i.e., I can't do anything else with that money EXCEPT buy the house. Another factor, credit scores. 15% of the population has a credit score between 680-699. That 15% of the population had the same terms available to them, for the most part, as someone with a 740 credit score a year ago. Now, that's not even close to being the case. So you've decreased your pool of potential buyers by 15%. Both of those two factors, higher opportunity cost of the purchase and 15% decrease in buyers, have pushed down demand for that property. The question is not "Is my house worth less today than it was a year ago?" The question instead is "Did I buy my house for more than it was worth a year ago?" Sounds silly and redundant, but think about it and you'll see the difference. Lose credit standards, immediate access to hundreds of competing lenders in your immediate market, historically low interest rates, or "cheap money" to put it another way, all artificially increased demand thereby artificially increasing price.

So when your client asks you, "if I buy this house, will it be worth less today than it will be in a year?? I saw 9.7% lower values on the news!" The answer is "I saw that to, can you believe that people were paying almost 10% too much for houses a year ago?!" And then just explain why house prices were so inflated (see my explanation above....) and why now is actually the PERFECT time to buy. Because the prices are actually now CORRECT and fair market value becasue only people like you (as said to your client of course) who can afford it and have good credit can purchase this and therefore supply and demand have corrected themself.

No one can deny that, it's fact and it's very exact and scientific. It's not your "opinion of your local market" or media bashing. It's simple tride and true economics.

So all this boring financial mumbo jumbo I post isn't for my own entertainment, it's for your knowledge and to arm you and give you the leg up on the Realtors that don't see why this is even relevant or necessary. Slowly, those members of the Realtor heard are being thinned and the ones that are paying attention to the financial markets will be the only ones left on the other side of this market shake up. Call me and I will be more than happy to help and answer any more questions if you have them. Imagine what I can do with your clients when you tell them to call me for their mortgage?

Credit Part 4-

10% of your score is derived from what types of credit you have.

- A mixture of all types of credit is best.

- 3 to 5 revolving credit cards is optimal.

- Having a mortgage in your mix raises your scores.

- New credit temporarily decreases your score because it will show unrated. Once you've made a payment, it will report as "paid as agreed" and your credit scores will subsequently increase as a result.

Implement this side of it, i.e. opening more credit cards etc., after you've tested the water and have a good budget in place. Don't jump into this immediately, 10% of your score as opposed to the much higher percentages in part 1-3. This could get out of hand if you let it so this is to move you up into that next level only after you've pr oven yourself in the earlier stages of credit building.

Hope this helps!

Big day in the financial world today. Bernanke and Paulson testified on The Hill about the $700 BILLION, I still don't even think that's a real number, plan to bail out the markets and bring an end to this mess. Of course the government has always been oh so efficient at "fixing things" so I'm sure everyone is breathing easy.....

The little shindig on Capitol Hill started at 9:30am I believe they wrapped it up about 3:30pm this afternoon. I hate that I missed it because you know it was riveting stuff. Congress is all of a sudden "concerned with the tax payer", which in my opinion means "it's an election year." Both Bernanke and Henry Paulson made a strong case but when it was all said and done, they wrapped up in a state of uncertainty. The markets absolutely hate uncertainty. The effects were basically a closing at 161 points lower for the Dow at 10,854. The NASDAQ was 25 points to the wrong side of 0 closing at 2,153 and the broader S&P 500 followed suit shedding 18 points to close at 1,188. Our FNMA 5.5% benchmark mortgage backed security closed the day up 12 bp at $100.06. However, it had been trading as much as up 62bp so the day was positive on the finish, but the path that was taken was a move in the wrong direction. Most lenders repriced for the worse this afternoon so a rate quote at 10am this morning was based on the 5.5% FNMA trading 28bp higher than where it closed. So as much as .125% uptick (really more depending on how that lender priced their initial rate sheets) would be more than feasible as of 4pm this afternoon. That's how volatile we are folks, I can't say it enough. If the rate you want is there when you speak to your mortgage professional, lock it in on the spot because no one can guarantee what direction things are going to swing in. I still maintain that at some point, the safety of a government supported/backed Fannie Mae/Freddie Mac platform will be an attractive place for investors and money will move into bonds driving up price and driving down rates. The question mark comes with the "when" part of the issue. So I will stick with my lock suggestion on anything closing inside of 60 days. Anything outside of that, float. (Although, I may tweak this with 45-59 days "lock suggestion but an inclination to float..." is that ambiguous enough?)

Enough! That's important, but boring information. Back to the Credit "mini-series."

Part 3- 15% of your score is derived from the length of your credit history.

- Hold on to your credit cards, even if the rate is not great.

- The longer the history, the better. One thing all 800 scores have in common is a long history with the SAME companies.

- You may want to use cards periodically to keep them from being considered inactive. "Inactive" cards are ignored in credit scoring models.

So while this part doesn't offer anything that will immediately impact your score, you can't "speed up time" to lengthen your history, you can take steps now that will provide you with a benefit moving forward. This 15% is not anything that you can do much about in the here and now but it can certainly help you 2, 3, 7 years from now moving forward if you take the advice and establish those relationships with creditors. Look at it from the side of the bank/lender/cc company, you appear as an individual that not only pays their obligations, but you are in it for the long haul with anyone you do business with and that makes you a source of recurring income for them. That's obviously attractive for lenders so it will be signaled through higher credit scores to remind them how attractive you are!

Call me with questions on the credit updates and also feel free to contact me with questions about my daily market info. I'm always happy to help so don't be shy.

More tomorrow of course.