Lewis Poretz - - Maryland Mortgage Expert -

Have you been listening to the media lately?

Many are saying that the housing market has hit bottom and the economy is on the way to a recovery. To these people I say nonsense! As a mortgage banker who fields calls for refinancing and purchases every day I can tell you this is a false statement which is harboring false hope. I have my finger on the pulse and it is not good. Here is a snapshot of how I see it -- like it or not.

The stock market is still 40% off where it was just a year or so ago. And in my opinion will continue to head the wrong way. Unemployment is up. Way up! In fact it will likely go over 10% next month. That means if you put 50 Americans in a room, 5 of them will be unemployed. 1 in 5 American home owners are under water! Foreclosures continue to rise. A recent report shows that 1 out of every 4 homes are delinquent on their mortgage. If you live in a neighborhood of 50 houses, 12 of your neighbors could be facing foreclosure. Staggering!!!!

Here is my finger that is on the pulse and this is what it is telling me.

I am approving fewer loans than I did last month and the month before that.

Housing prices continue to sink at an unthinkable pace.

Credit scores continue to drop.

Income continues to drop.

Personal debt continues to increase.

So what can I do about this you ask? First of all, hunker down. Change your spending habits. Stop using credit to purchase things. Cut up your credit cards. Call your creditors and ask if they have any programs to help eliminate your debt faster and less costly. Pay your mortgage, autos, electric and feed your family first! Do not let unscrupulous creditors and collection departments bully you. And finally this may come as a shock to you hearing this from a mortgage banker, do not open a line of credit or a second mortgage. If at all possible, do not consolidate your bills into a new mortgage and eat up the remaining equity in your house. These may be moves you never recover from.

In my opinion, this country is in for a more serious economic crisis than most so called experts have ever predicted. I see this stuff every single day and I am living this nightmare right along with you. My mission is to provide you with honest answers to your questions. Possibly selling your home and moving “down” makes the most financial sense. Maybe, walking away from your house or negotiating a short sale makes the most sense.

Seek high quality advice and a get a complete credit check up from someone who has a heartbeat and NOT a dollar sign in mind. It may be the most important move you ever make.

Mortgage rates this week should be -- HIGHLY VOLATILE

As appraisal requirements become more detailed typically resulting in substantially lower appraised values, mortgage refinance deals are falling by the wayside. I have never witnessed such a huge difference in clients perceived value and actual appraised value. Up to 400K spreads just this week.

So what does this mean to me?? – Let’s say you have some equity left in your house and you have a need for cash out – (college, home improvement, bill consolidation whatever…) the true motivation in refinancing would be cash, NOT interest rate alone. Rates are higher – that is a fact, but there is still cash available with acceptable appraised value…. that is the problem… as values continue to fall, consumers are facing less available cash when refinancing.

Don’t let interest rates determine your refinance if cash is a big factor. You may lose the opportunity to achieve your goals. We are still lending money!

Why would I ever want to refinance my 2.5% line of credit???

Were you one of the ones who took out a monster line of credit a few years back, because you could? Well there were plenty of you that did. And what a brilliant decision you made huh? Where else could you get a payment that low for that amount of money borrowed? Why would you want to refinance a 100K loan at 2.5% to a fixed rate that is higher?

Let’s assume the prime rate (the tool used in adjusting your line of credit) remains low for a bit longer. Eventually, when government debt must be repaid and inflation hits – (all the experts say it’s coming) mortgage rates will hit double digits. It’s a fact. History repeats itself. To see in black and white what that could mean to you, look at a few examples below, based on the prime rate historical index.

Let’s assume your rate today is set at prime (3.25%) - .75 which would be a rate of 2.5%

100K balance 250K balance

2009 - @ 2.5% monthly payment - $208 $520

2008 - @ 5% monthly payment - $416 $1041

2006 - @ 8.25% monthly payment - $708 $1718

1989 - @ 11.5% monthly payment - $958 $2395

1979 - @ 21.5% monthly payment - $1791 $4479

Purchase activity appears to be attempting to shake off the cob webs…..

By no means does any so called expert have enough facts to call an end to this recession/depression. Many key indicators signal things will get worse. I can add this as a fact. We are receiving many more calls every day regarding purchase money. Refinance still far outweigh purchases but we are finding activity is increasing ever so slightly, with most of the inquiries coming from first time home buyers.

*** If you do not currently own your home, you pay your bills on time and you have a couple bucks saved up -------

There may never, ever, ever - ( i am not kidding about this!! ) - in the history of the world be a better time to buy a house again!

You are what is known as a seller’s dream – a non contingent borrower. Side by side with an experienced real estate agent and a strong commitment letter you are driving the bus and calling all the shots. Many contracts these days are based on the sale of a purchaser’s current residence. Well guess what, houses are not selling.

Find out what you qualify for today. Money is available to lend!

The general rule of thumb when watching mortgage interest rates is as follows –

Good news for the economy causes the stock market to rise and interest rates to rise.

In the most simplistic of analogies - Bad news for the economy causes investors to pull money out of the stock market and into the safe haven of treasuries, causing mortgage interest rates to fall.

This is how it always used to be. In this economic climate no rules seem to apply but trends still remain typically somewhat the same. The stock market rally of the past few weeks has caused rates to increase. Loan level price hits for cash out, high loan to value, lower credit scores and other factors have moved some borrowers qualifying rates from the 4’s to the 5’s this past week. The lower rates are still available but they now come with a steeper cost in the form of discount points.

Earnings reports are expected out on Wall St soon. Many suggest the recent stock market rally was just mere profit taking. Others are calling for another huge drop in the stock market. Using the theory above, this could mean interest rates may possibly drop again. We have witnessed three or four rate drops in the past few months. Every rate dropped stopped at the same level. If you have been sitting on the sidelines waiting for rates to return to the level of recent weeks, pull the trigger when they return and stop speculating on further declines. I have had way too many clients who waited too long only to have rates return to the lower levels and were not ready to make a move.

Timing is Everything!

Maryland Mortgage Rates