mary taylor

I've got good news and bad news...which do you want first?

OK - here's the good news. Interest rates are at historic lows, making it possible for many homeowners to refinance and improve their financial position - and combined with homes listed currently at bargain prices, those who are in the market to buy are able to purchase the home of their dreams and get a great deal.

Here's the bad news. All lenders and investors in the US have been completely slammed with the recent increase in loan applications - right at the time that many have laid off staff to save money in a challenging economy. This means that time frames needed for underwriting, approvals and closing have become longer than normal. It also means that some companies have chosen to actually raise rates, just to slow down the volume to a manageable level.

But wait - there's an answer. I know how to plan ahead and be smart, so that we can keep your rate protected. We may want to consider a longer lock period than we might normally utilize, just to ensure that your loan will be processed, underwritten, approved and closed in time to protect your rate in this extremely volatile climate.

I will also ask that you respond quickly when I request information or documentation, as the faster we can get your file submitted and approved, the better we are able to protect your rate. The best news is that we are working together - and as always, I encourage you to get in touch with me with any questions you may have at this time!

In response to the higher mortgage default rates being experienced by Fannie Mae and Freddie Mac (the largest buyers of 30-year fixed, conforming mortgages), the formal announcement of "Risk Based Pricing" was established during 2008.

Before this was announced, a 30-year fixed loan was basically the same price for any borrower with a credit score of 660 or higher and a loan amount up to 95% of the home value. But now, Fannie and Freddie require pricing "add-ons" using a matrix of credit score and loan-to-value percentages. This risk based pricing is MANDATED by Fannie and Freddie, and is required of ALL lenders originating conforming 30-year fixed loans.

Sometimes the interest rate can be increased to cover these add-ons without having to pay them out of pocket, but that is becoming increasingly difficult in today's market. Investors have changed the way they create rate sheet options, and they offer very little in the way of what is called "premium pricing", which used to allow options for closing costs or points to be covered in return for a higher interest rate. But in today's environment, sometimes the add-ons must be paid in the form of points - to either keep the rate and corresponding payments as low as possible, or sometimes because there simply is no other way they can be covered.

The bottom line is - smart consumers can't just call a lender and say "what's your rate and closing costs?" There are simply so many unknowns with the combination of credit score, loan-to-value percentages, property type, etc... that any reputable lender should be upfront, and be clear that any quote given is based on an assumption of certain parameters.

Last week was eventful and this week has a few "market movers" in store for us. This week we'll see Retail Sales numbers as well as CPI. Both of these will give the market some insight as to the current direction of the economy. The consensus is that we are still in a strong decline, especially after the Jobless Claims figures that were released last week.

The Fed's commitment created greater security in mortgage bonds and the market responded by investing heavily in these low risk instruments. In an environment where investors are scared to death, they love having a bond that pays a decent return (short term treasuries are paying close to 0.00% right now. Yes, I said near 0.00%!). So, why do you care.....well, maybe you don't. But, I'll explain anyway: mortgage bonds are sitting at "all time high" prices and have been stuck in a "trading range" for over three weeks now. The only thing that will help bond prices climb higher (and rates drop further) will be another major market event. More likely is that bonds will stay in this range as long as the Fed continues to buy mortgage debt and as long as the economy remains in the doldrums.

So, rates are in the high 4% - low 5% range. We all know what's happened to home prices. The Fed is offering a great tax incentive (a $7500 tax credit along with the other usual deductions) for making a home purchase. There are still some down payment assistance programs available. In addition, VA & Rural Housing are great 100% programs with good rates and no mortgage insurance. Anyway, there are so many more reasons to purchase a home right now....in fact more reasons that at any time in the past decade. If you need an analysis for a client, friend, relative, or co-worker, just let me know.

Four Critical Questions to Ask Mortgage Representatives!

According to industry statistics, over 50% of the loan originators in the business today have been in the industry for 3 year or less. Because of this, you must make sure that you are working with experienced, professional loan officers. The largest financial transaction of your buyer's life is far too important to place into the hands of someone who is not capable of advising you or your buyers properly. But how can you tell?

Here are four simple questions that a lender absolutely must know the answers to. If they can not answer these simple questions........... run, don't walk, to a lender that does.

1) What are fixed mortgage interest rates based on? (The only correct answer is "Mortgage Backed Securities" or "Mortgage Bonds", NOT the 10-year Treasury Note. While the 10-year T-Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in opposite directions. DO NOT work with a lender who has their eyes on the wrong indicators. This could cause your lender to advise a client to lock or not lock their rate at the wrong times).

2) What is the next Economic Report or event that could cause interest rate movement? (A professional lender will have this at their fingertips. For an up-to-date calendar of weekly economic reports and events - If you are not on our list please let us know. We will see that you are added to the weekly distribution list).

3) When Mr. Greenspan and The Fed "change rates", what does this mean - and what impact does this have on mortgage interest rates? (The answer may surprise you. When the Fed makes a move, they are changing a rate called the "Federal Funds Rate". This is a very short-term rate that impacts credit cards, credit lines, auto loans and the like. Mortgage rates often will actually move in the opposite direction as the Fed rate change. This is often due to the dynamics within the financial market and how they respond to the change in the Federal Funds Rate. For more information and further explanation, just give us a call)

4) What's happening in the market today, and what do you see in the near future? (If a lender cannot answer how Mortgage Bonds and interest rates are moving today, as well as what is coming up in the near future, you are talking with someone who is most likely reading last week's newspaper, and probably not a professional with whom to entrust your home mortgage financing)

It's your business and your client's welfare. Expect nothing but the best from your service providers.

Hey there--

Well, this week has been a busy one: I was a victim to that dang Stomach Flu BUG! And it's been really busy in the markets. Over the last few days the stock market has lost over 600 points. The initial jobless claims that hit the market today was much worse than expected at over 500,000 jobs lost. In addition, some major retailers and industrials are reporting big losses. All in all, the market is having a hard time finding "a bottom". Many analysts expect that this recession is going to be deeper than originally anticipated. One reason for this is that other nations are slipping into recession, and this will only serve to prolong ours. As one analyst friend of mine put it, "It's hard to get over the flu when other people in the house have it".

There are oversight hearings taking place to review "the bailout" and the actions taken so far. One item of note was Secretary Paulson's change on "troubled mortgage assets". When the bailout plan was originally drafted and approved, one of the intents was for the Fed to begin to purchase mortgage backed securities. This was very well received by the markets (both nationally and globally) as it would provide some stability and some assurances regarding these debts. In a statement yesterday, Secretary Paulson announced that they intend to purchase shares of numerous banks around the country and not the troubled assets. One concern is that the Fed has been given too much authority to make changes to the plan (and other pieces of the economic system) without recourse. One example of this was the change to section 382 of the tax code (which gave banks a $140 Billion windfall!). Because it was a 5 sentence notice, inside the hundreds of pages of legislation, this change (which repealed a 22 year old tax law) was not noticed until after the bailout was pushed through Congress. In short, many legislators are furious. Some have concluded that the action was illegal. What will come of this, we don't know yet but it will definitely be interesting to see what happens.

Introducing the

GRANT/CLEVELAND COMMUNITY

SKI AND SNOWBOARD SWAP

Since skiing and snowboarding both require specialized equipment and clothing, the Grant and Cleveland High Ski Racing Teams are hosting our fourth annual event - the GRANT/CLEVELAND COMMUNITY SKI AND SNOWBOARD SWAP.

Individuals, families, local shops (like The Mt. Shop and Ski Chalet), local manufacturers (like Solstice), and national companies (like Blizzard and Atomic) are all attending. All you have to do is bring stuff to sell (if you wish), and be ready to take home some bargains. This is no small time event... last year we did nearly $30 thousand dollars in sales! We had bargain basement prices on new equipment - some of it current model - and yard sale prices on demo, rental, and used equipment.

Three years ago we created this community-based event promoting the buying and selling of ski and snowboard gear and clothing by individuals and families. Seeking a WIN-WIN event, the ski racing team provided the forum and did the groundwork to make the swap fun and valuable. Now we are making it an annual tradition, benefiting local merchants, the high school ski teams, and participating families for years to come. Need snow sport stuff, come on over. Want to sell your old gear, bring it in, we've got buyers.

Mark November 22nd and 23rd on your calendars. Come to the Budweiser building on the corner of 37^th and NE Sandy between 8:00 am and noon on Saturday to drop-off your stuff to sell. The sale hours are from noon to 5:00 pm on Saturday, then 10:00 am to 2:00 pm on Sunday.

Your admission donation of $2 per individual or $5 per family will let you eat free popcorn, see some Warren Miller videos, and shop for some incredible winter sports gear deals. Additionally, fitness experts from the Alameda Fitness Center will be providing ski/snowboard fitness assessments including strength, agility, and flexibility to help you target your workout needs and improve your skiing enjoyment.

The 30% commission on goods sold will help support the Grant and Cleveland Ski Racing Teams. By taking part in this fun community event, we can help keep our students off the streets and on the slopes!

Think snow and see you at the best swap in the metro area!