Clint Hammond

Alrighty....I'm done predicted anything exact because it's impossible and I'm too proud to be wrong more than a couple times...tops!

Stock market tanked 372 points (closing at 11,015), the NASDAQ shed 95 points (2,178 close) and the S&P rid itself of Friday's gains to the tune of 48 points (closing at 1,207). So of course if money left stocks, it went into bonds right? Wrong, our 5.5% FNMA benchmark dropped 59bp to close at $99.51. That will push rates 3/8ths of a point to 1/2 point higher than we were looking at on Thursday and Friday of last week. So if money didn't go into stocks, obviously, and it didn't go into bonds, obviously, where did it go? Directly into gold ($44.30/oz increase to close at $909/oz) and just when you worried about oil prices "being too low", crude oil futures enjoyed their largest one day gain in history, +$16.37, to close at $120.92/barrel. That is not good but we have to play the cards we're dealt and there isn't anything else we can do. That said, here's today's suggestion if you're toying with a lock/float option. If you're closing within the next week, lock it in. If you're closing between 8-20 days from now, lock in. If you're closing 21-60 days from now, LOCK IT IN. If it's outside of 60 days for a closing, let it float for now because the cost of a lock any longer than that is going to cost more than the benefit that you'll receive by locking. In other words, either the rate will be enough higher that it makes sense to let things run it's course and provided someone like me, someone with instant real time access to MBS, is watching your loan, you may be able to take advantage of a pricing spike (rate dip) that would be short term but would put you at a lower rate or at the very worst, the same rate as you would have if you were in one of my shorter windows. The other option for a longer lock would be to take today's rates, but pay an up front premium for it on the longer lock. (Translation - you would pay a point(s) to secure the same rate as a shorter term lock without points.) I don't ever charge points, so all my longer time-line closings are floating right now and I'm locking in loans tonight that are shorter. One of the nice things of being a mortgage bank and not a broker, I have overnight protection. So that's my opinion and the way I see it, I can't guarantee anything in this market but don't let greed, i.e., the uncontrollable desire to be overly rate conscious, be a detriment to you when .125% lower rate may save you a little yes, but not as much as a .5% jump will cost you. In times like this, err on the side of caution. Call me if you need further explanation or want to discuss your situation, I'm more than happy to help!

Now for my Credit scoring part II.

30% of your score is derived from outstanding balances being carried on accounts.

-Ideally, your balance should be below 10% of you max credit limit.

- You should make sure that your credit limits are reported...otherwise, any balance will appear to be maximum balance.

- It is better to spread balances evenly over a few cards rather than consolidate it all on one.

- Being over 70% on any card is detrimental to your score. Balances as close to zero as possible will improve your score.

- An authorized user is treated as a joint account holder so remove yourself as one if you can, that way you aren't punished for the sins of another. (And they aren't punished for your sins!!)

- It doesn't help your credit score to payoff credit cards and close them with no balances. By reducing overall available credit, increases your overall ratio. In other words, if you are fortunate enough to be able to zero out an account, say with your $7,500 first time buyer tax credit, leave the card open but open with no balance and even ask them to increase available credit. They will be more likely to do so if you have no balance to encourage use of that card. However, if you do use it, use it only to the extent that you can pay it off the following month. That way you don't get it out of control, you are using the revolving account, and your ratios are good. The end result will be higher credit scores giving you the ability to "buy money cheaper" the next time you need to borrow.

Remember, credit is tight and guidelines are strict these days. Borrowing money is harder than it has been in a long time as far as qualifying. Ever edge you can give yourself is invaluable to your ability to borrow money at the lowest rate so keep an eye on your credit and put these tips to use and you'll thank me later. That's a fact.

Part 1 one of 5:

With an ever increasing number of guideline changes and borrowing money becoming more and more difficult, we have to be able to advise our clients of things they can do in order to help the process out. Income is one that immediate change is often not an option. Assets, with time, can be built up through saving. Credit is often not so much overlooked but seen as the wild card. Almost like people don't have full control over it and certainly no real understanding of it.

Granted, it is not an exact science in that "If I do or don't do "A,B, and C", then I know that the results will be "X, Y and Z." However, by knowing several key ingredients and operating with this knowledge, you will never be caught completely off guard by your credit score. (Or that of your client.) There are 5 components that determine your credit score. In this, part 1 of 5, I will let you know what those components are and then briefly go into the first component with a little more details. Each entry after that will be another component and details on each. Hope this helps!

5 Determining components for credit score-

1) 35% of your score is derived from payment history, collections and public records.

2) 30% of your score is derived from outstanding balances being carried on accounts.

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

4) 10% of your score is derived from what types of credit you have.

5) 10% of your score is derived by the frequency and number of inquiries.

Payment History

Thought Process- People who have failed to make payments in the past tend to do so in the future.

- The more recent the delinquency, the more negative the effect it will have on the score.

- The good news is that the effect diminishes over time.

- The later the payment, the more negative the effect it will have on your score. A 90 day late is worse than a 60 day late, which is worse than a 30 day late.

- Weight is given pertaining to the derogatory information in the following order (least to most):

* Serious delinquency

* Charge off

* Repossession

* Foreclosure

* Bankruptcy

- Missing low dollar amount payments is better than missing high dollar amount payments.

- Paying off a collection can actually reduce your score. Scoring model looks at activity to determine the effect on credit score. Paying a collection makes the activity date a recent date and therefore lowering the score. The long term net effect, however, will be positive as it removes derogatory debt owed.

- Paying charge offs or liens won't significantly effect teh score unless they are within 24 months. You may be better off paying past due balances if you need an increase in score to be more immediate.

Your clients will asking you about credit, so make sure that you know what you're talking about. Keeping them informed and helping them improve their credit will most certainly lead to a sale in the future even if not immediately. And working for that "future sale" is almost as important as the one closing next week. That way, you keep your pipeline full and at some point you should have a steady stream of 1-2 closings a month for clients that have been "in the works" for a period of time while things were getting straightened out with their financing. This needs to be a dual effort with you and with your lender. I work with many of my borrowers for extended periods of time, some as much as 18 months, before we're ready. We work on credit, we save our money, and we have smooth sailing when it's time to close a loan, all the hard work is done!

Apparently the government is 100% in the banking business these days huh? Markets volatile, as always. Dow finished way up, two day gain of 778 to close the week at 11,388. NASDAQ jumped 74 points to close the week at 2,273, and the S&P banged out a 48 point gain to finish at 1,255. This took money out of bonds and our benchmark FNMA 5.5% mortgage bond finished 47bp lower at $100.53. This lead to several reprices for the worse. Although we traded in a 104bp range which was bigger than yesterdays so several lenders, the knee jerk guys anyway, repriced in BOTH directions today. It was pretty wild to say the least.

What may have been lost in the shuffle though was the fact that Fannie and Freddie will have increased purchasing power of mortgage backed securities so this should, should, have a downward pressure on rates for home loans and help further this downward trend we've been on. All rallies have to take a breather and I'm hoping that's what the past couple days have been. If I'm right, start the phone calls for all those clients you've worked with this year that haven't purchased yet. Especially those from June/July when rates were peaking because in some cases they could be almost 3/4 of a point lower than any quotes they received then, even after today's increase. Sometimes it's just "little extra" that pushes someone into the buyer range.

The theme has been fear and anxiety lately because that's all you can get on the news and in the paper. It's the overall vibe you get from anyone any more. As we've discussed, fear and anxiety kill sales, not product or price. Use this knowledge of the markets, regardless of trends and direction, to quell that fear. The news itself isn't always the kicker, most of the time it's just security of "the people working for me, know what is going on" and that's a security blanket in and of itself. So use your resources, utilize someone like Clint Hammond...just a suggestion....who can help you play the "other side of the equation" because when that equation is balanced, you sell houses. It's that simple!

Another wild day in the financial world. Did you expect less? Bonds poked their head into positive territory but showed ridiculous volatility as they traded in a huge 81 bp range. The 5.5% FNMA mortgage bond ended the day to close flat, $101.00. Weekly jobless claims increased ty 10,000 to 455,000 and the four week moving average edged up 5,000 to 445,000. The trend here is obvious, we have a week labor market. The Philadelphia Fed Manufacturing Index for September improved to 3.8 in from a -12.7 in August, the first above zero reading since November of 2007. This news was largely ignored as everyone's attention was on the financial news and rumors. In an attempt to halt the global financial crisis and restore investor confidence, the Fed pumped $180 Billion into money markets in a coordinated effort with The Bank of Canada, the Bank of England, the European Central Bank, the Bank of Japan, and the Swiss National Bank. Morgan Stanley and Washington Mutual are both reportedly looking for a merger or to be acquired. A late session report on CNBC saying Treasury Secretary Henry Paulson is considering the creation of a separate entity like the Resolution Trust Corp. formed as a result of the failure of the S&L Banks in the 1980's triggered a sharp rally in stocks. The idea would be for the government to step in to take over and manage all of the bad real estate and mortgage debt. The Dow surged 410 points to close at 11,019, the NASDAQ added 100 to end at 2,199 and the S&P got an additional 50 points today to close at 1,206.

The bottom line and the recurring theme here is this: It's crazy, it's going to stay crazy, and there honestly isn't anything that we as the individual can do to impact all this. The other reality that we need to keep though is that it although these are historic financial times and the reach and scope of this crisis is further reaching than most have realized, anyone that is paralyzed by it will certainly lose. Define lose how you want to. The second part to that reality is that it only makes it that much more crucial to be informed and well armed when your client needs an answer. If you try and make something up on the spot, they will know and that will do nothing but further their anxiety. "I don't know but I will find out" is more than acceptable. Just make sure you have your team in place so you can not only find out as you said you would but that you will get back to them with information you can be confident about and confidence is certainly a lack of anxiety.

Remember that no one is buying or not buying the product. The product itself couldn't be better. Your own home, the American Dream, your castle. What's not to love about the product. If other sales people had a product that good, everyone would be in sales. However, what you as agents have to deal with is the anxiety and the fear associated with the home buying process. Remember that most people will never make an investment anywhere near as big as the one they make when they buy a house. That alone brings anxiety even if the papers and the news stations were all warm and fuzzy and preaching the good news.....it's a lot of money and it's their family and their financial well-being. The most savvy client is as fragile as an egg shell right now and don't take it wrong, but you as their Realtor cannot fully eliminate the anxiety. You cannot fully mediate that conversation after dinner with husband and wife that gets into the nitty gritty of how Jr's college is going to be paid for or how are they preparing for their retirement. You cannot do that because it's not your place nor do you have 100% control of the transaction. You have control over your portion and you do a wonderful job there. It's also your job to have the financial team members in place. Mortgage Guy (that's me of course) for the debt, CFP for the assets, and CPA to handle income. See, it takes all four parts of this fragmented financial world we live in to come together as a whole for the greater good of our clients well being. That and that alone will make the sale, ending that after dinner discussion by having our clients say "We are well taken care of, "OUR TEAM" knows their industry, knows our situation, knows this market and knows how to combine those elements to put us ahead in this game." And then head lightly hits the pillow after your contract is fully executed.

Lets get together and help our clients sleep better at night knowing they're well taken care of.

Violent swings today in all markets. It's apparently a situation where no one has a clue what's going on. Employment market appears to still be headed towards more bad times as initial claims were higher. Should've been bond friendly but we're down 22bp as of 2:36pm. We're currently trading within a 78+ bp range. We've been down as much as 60+bp after opening the day up a little bit. The kicker is that the changes, when they have occurred, have been violent swings. One refresh of the page can be a 20bp move in either direction so there is almost no way to know what the next change is going to bring. We've seen lenders reprice where the notice comes out and before the new rate sheet is available, there has already been a significant move in the other direction. I've erred on the side of caution with my purchases and we've locked those in as of this afternoon. All of my refinances that are not locked, we're floating very cautiously right now with a keen eye on the market. We're now down 16pb so we've improved 6bp in the time it took me to write this entry.

And for those (like the guy I just heard on Bloomberg) that still think mortgage rates and mortgage backed securities are tied to the US 10yr Treasury note, the 10yr Tbill is up 28 bp today compared to mortgage backed securities are down 16bp. So anyone watching that T-bill to figure out the direction of mortgage interest rates is not going to be able to give you very good advice.

I'll try to get something else up after trading today. We're in interesting times to say the least and the more factual information I can put out, as opposed to what so many others are putting out there, the better I feel. Nothing is as scary as the unknown. The only way we recovery from this is to eliminate fear.