Eric Murrietta

Rates were high at the beginning of the week but have come down a bunch since Wednesday (see rates at www.1amllc.com/murrietta). This should help to motivate a few more buyers in the marketplace. It would be nice to see rates come down by another .50% over the next couple of weeks to make it easier on the buyers. Sometimes great rates can attract and entice someone to pull the trigger.

This week in Review:

•1) SNOW: Not in Phoenix, but on my trip to Salt Lake City last weekend I was a part of the first snow of the winter. It was absolutely gorgeous. There is something pristine about fresh snow covering the trees and ground. I do look forward to the cooler weather over the next few months in Arizona. It will be a sweet relief from the blistering heat.

•2) Red Sox - Down but Not Out: In a stunning turn of events over the final three innings last night, the Boston Red Sox mounted an historic comeback to beat the Rays 8-7. As I watched the game I couldn't help but realize the feelings of both sides. It seemed the Red Sox knew they were going to win and the Rays were just trying to hold on. It will be an interesting weekend of baseball (if you are a fan or even if you just like competition) to see if the Rays can close out the Red Sox or if they will fight their way back from the brink of elimination.

•3) Stocks Surged then Crashed and then... I think at this point it is anybody's guess as to what the market will do. I have heard that on the 23^rd things will turn because the assets they are selling from some of the companies who went under will be completed and investors will understand the true value of these lingering pieces of paper. Only time will tell. You can read from my blog that I wrote on Columbus Day.

•4) FINAL Presidential Debate: It doesn't matter which way you lean - I have no opinion to throw out today. I will just implore again the need to vote. I do believe it is an important decision, as it is every four years, in choosing who the next leader of the country will be. We can't take for granted the opportunity we have to be a voice, however small it may be, in deciding how we feel the country will best be led in the coming years. So, spend a little time listening to the candidates and make the decision that works for you.

As of December 1, 2008, Fannie Mae will no longer accept mortgages that are underwritten outside of the their most recent policy/guideline changes. Following are a few of the policy changes.

1) Interest Only loans must be underwritten using DU. The Interest Only loans must receive and Approve/Eligible recommendation from DU to be able to deliver the loans to Fannie Mae.

REAL ESTATE AGENTS: Make sure that your lender is aware of the change above and is running DU for the specific programs that the customer is requesting. Nothing worse than getting into the process and finding out that there was a mistake and the customer doesn't qualify.

2) Cash-out refinance transactions now have a LTV/CLTV/HCLTV max of 85% on all principal residences. The new credit score if the LTV is >75% must be 660.

3) If a customer is looking to make an investment purchase the max LTV/CLTV/HCLTV is 85% when going through conventional programs.

REAL ESTATE AGENTS: Take the time to ensure that the customer has the necessary liquidity to complete the transaction. 15% down plus closing costs is a good chunk of change. Hate to see you lose time if the investor isn't a truly serious investor with cash resources.

The new Loan Level Pricing Adjustments are going to occur soon as well. For any loans under 75% the pricing adjustment is 1.75%. For any LTV greater than 75% the new LLPA will be >3.00%.

Remember that guidelines are continuing to change, so ensure that you are working with someone that understands these changes and can lead your clients down the path to a successful closing. Have a great day.

On a Monday that could have kept the panic alive, the Stock Market rebounded with its biggest advance in over 70 years. As the stock market surged 963 points due to the "government plan to buy stakes in banks and a Federal Reserve-led push to flood the global financial system with dollars" (Stanton, www.bloomberg.com), people are left to wonder if this rebound will end the dramatic drop in the stock market. (You can read the full article on the Dow's record day.)

You can also watch this video from CNN Money regarding the "Focus on Fundamentals" for the economy. Mr. Paul R. LaMonica explains what to watch for as the rest of the week continues to unfold.

I still believe that we haven't seen the end of this up and down rollercoaster ride in the economy as many investors are unsure as to what the bailout means, who is going to be affected and what the total damages may be when this chapter in America's history is over.

Couple things to consider:

1) Banks/Financial stocks were largely overlooked in today's rally.

2) European countries staging their own bailouts and in some cases saying we (the U.S.) got it wrong.

Who knows exactly where we go from here??? Let's just hope we begin to get some strategic leadership that will lead us into the next chapter in this story.

The untold story of how rate cuts are affecting the future and current profits of banks.

Net Interest Margin (NIM) - Is a measurement of the difference between the interest income generated by banks...and the amount of interest paid out to their lenders (deposits) Wikipedia.org

Problem - Community banks that lack liquidity raise CD rates in order to entice more deposits. However, the didn't put floor rates on their loans based on the Prime Rate (or WSJ) and so now are not only losing in the liquidity battle their profits are dwindling as well.

For example: Prime rate was at 8.25% in October of 2006. Loan made for prime plus .5% with no floor. 12 or 6 month CD rate at 5.25% = NIM of 3.50%...

Now Prime rate down to 4.50% (no floor on the loan so the new rate is 5.00%. CD rates at 4.50% to capture liquidity and the new NIM is .50%.

Not good...

But they lack liquidity for the bad loans and so they have to do something to increase deposits. The cycle is never ending it seems. No liquidity, no future profits - how can banks survive?

Obviously there is more that goes along with this and this is rudimentary at best but it is interesting to see how one solution may lead to another problem and so forth. Hard to fix a problem that has no boundaries.

Fall season is quickly approaching and the cooler it gets the more it feels like football and holidays. (The two do go hand in hand). There is always a ton to do outside as the weather cools...i.e. a comfortable bike ride, walking the dog (without burning their feet), driving with the windows rolled down, and even playing catch with friends at the park.

We can feel free to come out of our summer hibernation and enjoy what people from San Diego enjoy all year - beautiful weather. Remember to enjoy it as soon enough it will be 110 degrees and sweltering heat. On to some fun topics...

1) Stocks Tumble - Okay not so fun - but it is interesting to feel like a generation a part of history. This time in our lives we are experiencing, they will teach to our kids and their kids in the future. That is kind of "fun". However, on a side note - are people just over-reacting? I have read some books on stocks and studied it a bit and "Mr. Market" is mostly perception. I wish we could change the perception with some sort of good news. Bad news breeds more bad news which breeds more bad news which - you get the idea.

2) Cubs Lose - That's right 100 years and still nothing. ‘nuff said.

3) The Phoenix Coyotes begin their new season this Saturday night - Though I would enjoy going to the game, my own team is travelling to SLC where they say it may snow (what???). And nothing is more exciting than watching the kids you teach play the game. Let's just hope they do well this weekend - because losing as a coach is worse than losing as a player. Don't believe me - become a Coach.

4) For ideas on how to close a loan in less than 7 days - give me a call. (Sorry shameless plug - but I am excited that I was able to deliver for all parties involved.)