Michael Mullin, Mortgage Broker ~ Spokane WA Home Loans (509-252-9151)

Steven Jacobs of the Associated Press penned an article under this title and it appeared in various newspapers and online sources. To read the entire article CLICK HERE.

Tying the $700 Billion bailout plan to the housing problem is a smoke screen and driving me crazy.

Yes, there is a huge problem in the commercial paper lending industry making it difficult or impossible for businesses to obtain funds to continue operations. (UPDATE: I love it when I'm right - here's the bailout of the commercial paper one day after my post! Click Here)Yes, there is serious deterioration of the value of our homes and the disappearance of a limited number of mortgage options. However, the commercial paper problem and the housing problem are really DIFFERENT issues and it would help if the media began to educate themselves so they were not unwittingly misleading their readership.

Why then are the two issues treated as one in the media and by our elected officials in Washington D.C.?

My guess is because most of them don’t really understand the problems (which is the scary part) and, second, they know the best way to get the $700 Billion bailout approved is to scare their constituents into thinking they are all going to lose their homes to foreclosure if the bailout didn’t happen. Hence, let’s just call the entire problem a housing problem.

I read this morning that:

"Experts say the most important thing that needs to happen before the $700 Billion bailout even has a chance of working: Home prices must stop falling. That would send a signal to banks that it’s safe to stare doling out money again.”

This is so misleading it makes me want to scream. Banks do NOT dole out their money for people to purchase homes. Banks and other lenders advance funds that are immediately replenished by selling the home loan to Fannie Mae, Freddie Mac, FHA, or VA. All four entities are operating very well right now and home loans are being approved every day.

The next paragraph goes on to say

“The problem is the lending freeze has made getting a mortgage loan tough for everyone except those with sterling credit.”

Again, this is a completely misleading statement on two fronts.

First, there is NO lending freeze. I just had my best month in a long time – the result of home owners taking advantage of low rates in early September and refinancing to a lower payment. I checked the Mortgage Bankers' Association figures and they are reporting that in the first 9 months of this year, 7.65 million loans were originated worth $1.53 trillion. Does that sound like a freeze?

Second, you hardly need “sterling credit” to get a home loan. That is such an exaggeration as to make my head spin. I’ve got a borrower right now with a 641 FICO score that I can get approved on either a Fannie Mae loan or an FHA program. A 641 is not “sterling.”

All that’s really changed in the home loan lending industry in the last 12 months is that they have curtailed the loans being made to people who should not have received them in the first place.

Plain and simple.

If you have ok credit – down to a 580 for goodness sakes! – have employment with verifiable income, and $3,000 to $5,000 you can easily purchase a home in Spokane, and Eastern Washington (or just about any other place in the US for that matter).

Those are hardly insurmountable hurdles for a determined homebuyer.

Forwarding a Saturday Night Live skit is not something I'd normally do but this is just so funny (as if a $700 Billion Bailout can be funny) I can't pass up the opportunity.

You can view the skit on the NBC website HERE.

Everyone needs to start the work week with a good laugh!

Happy Monday!

A couple of items in today’s Spokesman-Review article on WaMu’s collapse offers clues not only to WaMu’s demise but to the current lending mess in general.

The first item is WaMu’s purchase of American Savings Bank and Great Western in the late 1990’s. I worked for a competing bank during those years and I had frequent conversations with borrowers who wanted to refinance their home loan for NO other reason than to get away from WaMu’s loan servicing department. It was common knowledge in the industry that WaMu was totally choking on the integration of the other banks’ loan portfolios with their own. I remember thinking to myself, “WaMu is going to ruin their business by trying to acquire too many other banks all at the same time.” I guess I was wrong by about 10 years.

The second item, and the one that goes to the heart of the entire lending mess, is the statement that WaMu’s former CEO Kelly “Killinger clearly understood how mortgages worked.” I want to be clear the following has nothing to do with Killinger himself, but more my opinion on how thousands of executives like Killinger drove their businesses into trouble.

Just because lending executives “understood how mortgages worked,” that does not mean their companies acted in a responsible and ethical manner. I personally think there is a broad range of reasons for the lapses of judgment used by these executives – everything from intentional fraudulent behavior to just naïve ignorance of the products they offered and the manner their employees offered these products.

WaMu is just the most recent example of how understanding mortgages doesn’t mean you will be successful as a mortgage lender. Gone from the media, but the all time biggest flop, is the demise of Countrywide Home Loans. While they may have “merged” with Bank of America let’s not gloss over the fact that it was CW’s use of the Option Arm and no income documentation loans that caused them to spiral into the ground. CW’s founder Angelo Mozilo was considered a visionary of the mortgage industry and Countrywide itself was the largest lender in the U.S. for many years running. I’m sure Angelo “understood” the mortgage business, but he’s out of business now.

Let’s not confuse understanding something with behaving in an ethical and responsible manner.

Spokane has been chosen one of the 100 Best Communities in America for young people, as judged by America’s Promise Alliance.

What an encouraging endorsement of our community!

Unfortunately it’s buried on page B4 of The Spokesman-Review so most people probably missed it. Why is it we give such little attention to really important stories like this?

I’ll be including this information in all my presentations to out of town buyers.

If you missed the original Spokesman-Review article, it can be accessed by CLICKING HERE.

The story also led me to discover the wonderful organization – America’s Promise Alliance – founded by Colin Powell in partnership with his wife Alma. They are doing great work in support of our children – CLICK HERE to check out their organization.