Michael Blanchard

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What a day! I don’t know where to begin.

Treasury Secretary Tim Geithner announced plans for the remaining TARP money. $50B will go to owner occupied middle class borrowers facing foreclosure to lower their monthly payment.

He also said the Fed and Treasury are committed to buying $600B of Freddie and Fannie debt and MBS. Banks participating in the bailout will have to undergo a stress test and also participate in foreclosure mitigation programs. The cost of these programs could reach $1.5 trillion dollars.

At noon today, the Senate is set to vote on the $800B stimulus package. Although the senate package and the house package must be married up, the bill is expected to eventually pass.

At 1PM, Federal Reserve Chairman Ben Bernanke will be speaking about liquidity with the House Financial Services Committee.

Needless to say this could make for a very volatile day. The Dow is down nearly 300 points and Mortgage Backed Securities are up 19 Bps. They were up 38 Bps earlier this morning.

It will take some time to see what affect all this news has on the mortgage market. All indications are that these efforts will have a positive effect on rates in the short term.

Although the Fed and Treasury are going to great lengths to keep rates low, there is no guarantee that rates will drop to levels the news media is projecting. The market is very dynamic and cannot be controlled by a single entity including the US Government. The Fed has actually been buying coupons with higher rates than our current rates. This will help to ensure that rates do not go beyond that level and also allows them to recoup that money as customers refinance to lower rates.

It’s still a great a time to buy. We need to work together to get people off the fence and realize that home prices and rates are at historic lows. They are losing opportunities while they wait for rates to drop. Customers waiting to save $25 a month on their mortgage payments while home prices go up thousands are not making a good move.

We will keep you posted as inevitable changes in the market occur. Please do not hesitate to call or e-mail us with questions. We are always here to help!

Happy Fed Week!

The big news of the week will be the Federal Reserve announcement tomorrow at 2:15pm. Although there is not an expected change to the Fed Funds rate which is currently at 0%, the key will be the wording of the statement to show their opinion on the economy.

Some of the Federal Reserve Bank Presidents have made speeches mentioning inflation creeping back into the market once some of the stimulus packages start taking effect. As hard as this is to believe at this point in time, this would have a negative effect on the mortgage backed security market.

I want to make you aware of some changes in the pricing we are currently seeing. Many investors had downsized their staff because of low production only to be overwhelmed with refinance business when rates dropped so dramatically. To try and keep up most have artificially increased the prices to slow production.

Also investors are not paying as much for higher rates (ones that are usually in the 0 point range). The reason being that there is a fear that if rates trend down the loans that they are holding will refinance and they will lose the premium they paid out for the loan. This coupled with increases in Freddie and Fannie adjustments has made the 0 point rates not as attractive as pointed programs.

Many customers especially new to the process are not aware of what points are or feel they have a negative connotation as they try to keep closing costs low. It is always good for your customer to talk to an experienced mortgage professional to discuss not only loan programs but point options. Depending on how long a customer plans on being in their new home points may be an excellent way to save money over the long haul.

I believe the adjustment by Freddie and Fannie and investor pricing issues will lessen as time goes by. I'm sure Freddie and Fannie are feeling the pinch of previous losses and are trying to recoup some of this money with current production. Investors should price more accurately and competitively as rates stabilize, they will get up to correct staffing levels and will once again be aggressive to compete for business.

All and all this is still a great time to be a buyer. Home prices are excellent and rates are still at historic lows. We have many great programs to meet customer needs. They include our 100% financing with no monthly PMI, FHA, VA, Conventional and excellent fixed and adjustable jumbo loan programs (up to 90% LTV with credit scores of 650 and above)!

We are in a great position to work with your customers to get them pre-approved and help them through the ever increasingly complex loan process.

Have a great week and if there is anything we can do to help please do not hesitate to ask.